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Housing Wealth Effects of Homeowners by Age Cohorts

  • Korea Real Estate Review
  • 2015, 25(1), pp.35-50
  • Publisher : korea real estate research institute
  • Research Area : Social Science > Law > Law of Special Parts > Law of Real Estate

LEE Hyunjeong 1,  유종선 2

1경희대학교
2경희대

Accredited

ABSTRACT

The purpose of this study is to explore housing wealth effects of homeowners on household expenditure on non-durable products and services. The age cohorts are divided into four distinct groups – young(35-44), early middle-aged(45-54), late middle-aged(55-64) and older(65 and older), and their wealth effects are examined in accordance to region(Seoul Metropolitan Area, SMA vs. non-SMA), housing structure type(apartment vs. non-apartments), and household debt-to-asset ratio(less than 25% vs. more than 25%). Using the 15th Korean Labour and Income Panel Study(KLIPS), this research analyzes 1,612 home-owning households. The statistical results reveal that annual household income and non-durable consumption are the greatest in the early middle-aged group, and each amount of financial, housing and real estate assets is the largest in the late middle-aged group. Household debt-to-asset ratio is found to be disproportionate to age. Further, it’s statistically significant that housing wealth has much stronger effects on household spending than does financial asset or real estate asset. Indeed, the consumption elasticity is greater for households living outside SMA, residing in non-apartments and holding lower debt-to-asset ratio. In particular, the young group with less than 25% of debt-to-asset ratio living in apartment outside SMA is likely to actively tap into their housing windfalls. Thus, the empirical findings explicitly support that housing wealth effects vary with different age groups, and rising housing wealth enables households to reduce insurance against future contingencies.

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This paper was written with support from the National Research Foundation of Korea.
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