Homeownership and the Accumulation of Real Wealth

1989 ◽  
Vol 7 (1) ◽  
pp. 69-91 ◽  
Author(s):  
B A Badcock
Keyword(s):  
Housing Market ◽  
House Price ◽  
Urban Housing ◽  
Capital Gains ◽  
Wealth Accumulation ◽  
Property Market ◽  
Urban Restructuring ◽  
Price Inflation ◽  
Capital Growth ◽  
Generative Mechanisms

The contention surrounding the significance of homeownership for social theory is reviewed, after which it is suggested that the conceptualisation of wealth accumulation for homeownership has yet to comprehend fully the ‘generative mechanisms' underlying capital gains or losses. There is a need to advance beyond the rather limited analysis developed by Thorns in 1981, to a consideration of the connections between urban restructuring, the transfer of value, and capital growth within the urban housing market. Trends in Adelaide's separate-housing market, 1968–75, are outlined to provide a context for the central question; that is, what is the relationship between class position and house price inflation? Too much temporal and spatial variability is encountered in a number of estimates of capital growth in the separate-house submarket to sustain the claim that this source of accumulation systematically favours those homeowners with the greatest real investment in housing. Regression analysis is used to demonstrate that at least some of the variability in capital gains or losses can be accounted for by indicators that relate to processes of urban restructuring. Further clarification of the theoretical significance of homeownership for social reconstitution must await a longitudinal study of the passage of households through the domestic property market in the course of a lifetime.

scholarly journals The role and significance of planning in the determination of house prices in Australia: Recent policy debates

2021 ◽  
pp. 0308518X2198894
Author(s):  
Peter Phibbs ◽  
Nicole Gurran
Keyword(s):  
Land Use ◽  
Housing Market ◽  
Land Use Planning ◽  
House Prices ◽  
Housing Prices ◽  
House Price ◽  
Evidence Base ◽  
Urban Housing ◽  
Price Inflation ◽  
Depth Analysis

On the world stage, Australian cities have been punching above their weight in global indexes of housing prices, sparking heated debates about the causes of and remedies for, sustained house price inflation. This paper examines the evidence base underpinning such debates, and the policy claims made by key commentators and stakeholders. With reference to the wider context of Australia’s housing market over a 20 year period, as well as an in depth analysis of a research paper by Australia’s central Reserve Bank, we show how economic theories commonly position land use planning as a primary driver of new supply constraints but overlook other explanations for housing market behavior. In doing so, we offer an alternative understanding of urban housing markets and land use planning interventions as a basis for more effective policy intervention in Australian and other world cities.

Resilient homeownership: how partnership-based finance would have prevented the 2008 US mortgage crisis

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Mejda Bahlous-Boldi
Keyword(s):  
Housing Market ◽  
Home Ownership ◽  
House Price ◽  
Capital Gains ◽  
Wealth Accumulation ◽  
Causality Test ◽  
Content Type ◽  
Long Run ◽  
Default Rates ◽  
Short Run

Purpose The purpose of this study is to demonstrate that the conventional mortgage system is not appropriate for household finance because it encourages equity extraction and excessive leverage during housing boom and leads to negative equity during a housing bust, a situation that translates into mortgage defaults and foreclosures. Home financing could alternatively be structured as a diminishing partnership preventing the homeowner from ever having negative equity. Design/methodology/approach Using Johansen’s cointegration test, the authors provide evidence of a long-run relationship between the delinquency rates, volume of refinancing and the change in house price index (HPI) during the 1994–2019 period. To unravel the short run dynamics between these variables, the authors used a Granger causality test that concludes that the volume of refinancing and the change in the HPI Granger cause default rates. Findings The authors provide evidence that under the current conventional mortgage system, excessive refinancing opportunities and equity extraction that are the main factors determining delinquency rates leading to a non-sustainable homeownership. Practical implications If mortgages were such that they do not incentivize defaults and foreclosures during a housing downturn, the recovery of the housing market always leads to capital gains. Therefore, disincentivizing refinancing and equity extraction would lead to a more sustainable homeownership. Social implications Households would be encouraged to pursue sustainable homeownership through a partnership-based model with long-term wealth accumulation for themselves and their heirs rather than short-term home ownership through the conventional mortgage system, leading to negative equity and defaults when the housing market slumps. Originality/value Policymakers ought to rethink the mortgage design by promoting partnership-based finance to protect the equity a household accumulates over a lifetime and thereby enhancing stable and sustainable homeownership.

Rent or buy, what are the odds? Analysing the price-to-rent ratio for housing types within the Northern Ireland housing market

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Daniel Lo ◽  
Michael James McCord ◽  
John McCord ◽  
Peadar Thomas Davis ◽  
Martin Haran
Keyword(s):  
Housing Market ◽  
House Prices ◽  
House Price ◽  
Main Property ◽  
Property Market ◽  
Important Indicator ◽  
Content Type ◽  
Rental Market ◽  
Price Series ◽  
The Relationship

Purpose The price-to-rent ratio is often regarded as an important indicator for measuring housing market imbalance and inefficiency. A central question is the extent to which house prices and rents form part of the same market and thus whether they respond similarly to parallel stimulus. If they are close proxies dynamically, then this provides valuable market intelligence, particularly where causal relationships are evident. Therefore, this paper aims to examine the relationship between market and rental pricing to uncover the price switching dynamics of residential real estate property types and whether the deviation between market rents and prices are integrated over both the long- and short-term. Design/methodology/approach This paper uses cointegration, Wald exogeneity tests and Granger causality models to determine the existence, if any, of cointegration and lead-lag relationships between prices and rents within the Belfast property market, as well as the price-to-rent ratios amongst its five main property sub-markets over the time period M4, 2014 to M12 2018. Findings The findings provide some novel insights in relation to the pricing dynamics within Belfast. Housing and rental prices are cointegrated suggesting that they tend to move in tandem in the long run. It is further evident that in the short-run, the price series Granger-causes that of rents inferring that sales price information unidirectionally diffuse to the rental market. Further, the findings on price-to-rent ratios reveal that the detached sector appears to Granger-cause those of other property types except apartments in both the short- and long-term, suggesting possible spill-over of pricing signals from the top-end to the lower strata of the market. Originality/value The importance of understanding the relationship between house prices and rental market performance has gathered momentum. Although the house price-rent ratio is widely used as an indicator of over and undervaluation in the housing market, surprisingly little is known about the theoretical relationship between the price-rent ratio across property types and their respective inter-relationships.

Adelaide's Heart Transplant, 1970–88: 2. The ‘Transfer’ of Value within the Housing Market

1992 ◽  
Vol 24 (3) ◽  
pp. 323-339 ◽  
Author(s):  
B A Badcock
Keyword(s):  
Built Environment ◽  
Housing Market ◽  
Urban Space ◽  
Capital Flows ◽  
Regression Models ◽  
House Prices ◽  
Wealth Accumulation ◽  
Urban Restructuring ◽  
Value Transfer ◽  
Differential Movement

Regression analysis is used to examine the interaction of a number of processes that are thought to be responsible for the geographical transfer of value within the built environment. These are derived from an account by Smith of the restructuring of urban space. The ‘transfer’ of value is imputed from the differential movement of house prices between 1970 and 1988 for geographical submarkets within the Adelaide Metropolitan Area. Although the interpretation of the regression models is complicated, the evidence for a tilting of the ‘value transfer’ gradient from an inner-outer bias, to an outer—inner bias, can be statistically inferred from the processes of restructuring that have redirected capital flows within the built environment of Australian cities such as Adelaide, Sydney, and Melbourne in the course of the last two decades. Thus the uneven capital formation that characterises urban restructuring and is ultimately capitalised into real changes in house prices is a significant source of the added wealth that is accumulated from homeownership. By this means it is possible to bridge the two ‘islands’ of theory: Smith's account of urban restructuring and Saunders's concern with the sources of wealth accumulation within the housing market.

scholarly journals ARIMA modelling of Lithuanian house price index

2015 ◽  
Vol 8 (1) ◽  
pp. 135-147 ◽  
Author(s):  
Arvydas Jadevicius ◽  
Simon Huston
Keyword(s):  
Housing Market ◽  
Market Price ◽  
House Price ◽  
Investment Strategy ◽  
Price Inflation ◽  
Price Changes ◽  
Content Type ◽  
Time Series Modelling ◽  
Price Movements ◽  
Modelling Approach

Purpose – This paper aims to investigate Lithuanian house price changes. Its twin motivations are the importance of information on future house price movements to sector stakeholders and the limited number of related Lithuanian property market studies. Design/methodology/approach – The study employs ARIMA modelling approach. It assesses whether past is a good predictor of the future. It then examines issues relating to an application of this univariate time-series modelling technique in a forecasting context. Findings – As the results of the study suggest, ARIMA is a useful technique to assess broad market price changes. Government and central bank can use ARIMA modelling approach to forecast national house price inflation. Developers can employ this methodology to drive successful house-building programme. Investor can incorporate forecasts from ARIMA models into investment strategy for timing purposes. Research limitations/implications – Certainly, there are number of limitations attached to this particular modelling approach. Firm predictions about house price movements are also a challenge, as well as more research needs to be done in establishing a dynamic interrelationship between macro variables and the Lithuanian housing market. Originality/value – Although the research focused on Lithuania, the findings extend to global housing market. ARIMA house price modelling provides insights for a spectrum of stakeholders. The use of this modelling approach can be employed to improve monetary policy oversight, facilitate planning for infrastructure or social housing as a countercyclical policy and mitigate risk for investors. What is more, a greater appreciation of Lithuania housing market can act as a bellwether for real estate markets in other trade-exposed small country economies.

Assessing Dutch housing cycle and near-term market prospects

2020 ◽  
Vol 13 (2) ◽  
pp. 257-270
Author(s):  
Arvydas Jadevicius ◽  
Peter van Gool
Keyword(s):  
Housing Market ◽  
House Prices ◽  
House Price ◽  
Future Market ◽  
Price Inflation ◽  
Content Type ◽  
Dutch Housing ◽  
The Usa ◽  
Near Term ◽  
The Uk

Purpose This study is a practice undertaking examining three main concerns that currently dominate Dutch housing market debate: how long is the cycle, will the current house price inflation continue and is housing market in a bubble. With national house prices reaching record highs across all major cities, future market prospects became a topic of significant debate among policymakers, investors and the populace. Design/methodology/approach A triangulation of well-established academic methods is used to perform investigation. The models include Hodrick-Prescott (HP) filter, volatility autoregressive conditional heteroskedasticity (ARCH approximation) and right tail augmented Dickey–Fuller (Rtadf) test (bubble screening technique). Findings Interestingly, over the years from 1985 to 2019 research period, filtering extracts only one Dutch national housing cycle. This is a somewhat distinct characteristic compared to other advanced Western economies (inter alia the UK and the USA) where markets tend to experience 8- to 10-year gyrations. Volatility and Rtadf test suggest that current house prices in most Dutch cities are in excess of historical averages and statistical thresholds. House price levels in Almere, Amsterdam, The Hague, Groningen, Rotterdam and Utrecht are of particular concern. Originality/value Retail investors should therefore be cautious as they are entering the market at the time of elevated housing values. For institutional investors, those investing in long-term, housing in key Dutch metropolitan areas, even if values decline, is still an attractive investment conduit.

scholarly journals The uneven distribution of capital gains in times of socio-spatial inequality: Evidence from Swedish housing pathways between 1995 and 2010

Urban Studies ◽  
2017 ◽  
Vol 55 (12) ◽  
pp. 2721-2742 ◽  
Author(s):  
Barend Wind ◽  
Lina Hedman
Keyword(s):  
Housing Market ◽  
House Price ◽  
Spatial Inequality ◽  
Capital Gains ◽  
Uneven Distribution ◽  
Market Dynamics ◽  
Housing Wealth ◽  
Investment Capital ◽  
Gains And Losses ◽  
Housing Pathways

Housing wealth is the largest component of wealth for a majority of Swedish households. Whereas investments in housing are merely defined by income, the returns on this investment (capital gains) are dependent on local housing market dynamics. Since the 1990s, local housing market dynamics in Swedish cities have been altered by the upswing in levels of socio-spatial inequality. The simultaneous up- and downgrading of neighbourhoods is reflected in house price developments and exacerbates the magnitude of capital gains and losses. This article proposes that the selective redirection of housing pathways that causes an upswing in socio-spatial inequality translates into an uneven distribution of capital gains as well. A sequence analysis of the housing pathways of one Swedish birth cohort (1970–1975), based on population-wide register data (GeoSweden), is used to explain differences in capital gains between different social groups in the period 1995–2010. The results indicate higher capital gains for individuals with higher incomes and lower gains for migrants. When socio-spatial inequality increases, the more resourceful groups can use their economic and cultural capital to navigate through the housing market in a more profitable way.

scholarly journals International Real Estate Review

2017 ◽  
Vol 20 (3) ◽  
pp. 251-286
Author(s):  
Steven C. Bourassa ◽  
◽  
Donald Haurin ◽  
Keyword(s):  
Housing Market ◽  
House Price ◽  
Housing Affordability ◽  
Property Taxes ◽  
Metropolitan Statistical Area ◽  
User Cost ◽  
Price Inflation ◽  
Property Insurance ◽  
Mortgage Interest ◽  
Tax Deductions

This paper outlines an approach to constructing a Dynamic Housing Affordability Index (DHAI) that reflects the anticipated cost of owner-occupied housing and performs well in tracking changes in the demand for homeownership and other aspects of the housing market. Our index is grounded in the user cost theory and influenced by variations in the price of housing, mortgage interest and property tax rates, property insurance, transaction costs, and depreciation and maintenance. It takes into account the benefits from U.S. income tax deductions for mortgage interest and property taxes, and considers the role of expected house price inflation in reducing the cost of housing. We show that the DHAI is correlated with national and regional consumer sentiment which reflects the demand for owner-occupied housing, regional and metropolitan statistical area (MSA) homeownership rates, housing market characteristics including housing starts, and sales of new and existing housing. There is evidence that the DHAI performs better than other popular measures of affordability.

scholarly journals Land price dynamics in a large Australian urban housing market

2014 ◽  
Vol 7 (1) ◽  
pp. 42-60 ◽  
Author(s):  
Greg Costello
Keyword(s):  
Housing Market ◽  
Price Change ◽  
House Price ◽  
Housing Markets ◽  
Urban Housing ◽  
Price Dynamics ◽  
Data Set ◽  
Content Type ◽  
Hedonic Price Analysis ◽  
Spatial Disaggregation

Purpose – Housing is a composite asset comprising land and improved components varying as proportions of total value over space and time. Theory suggests land and improvements (structures) are unique goods responding differently to economic stimuli. This paper aims to test the expectation of different overall house price changes in response to variation in land and improved components. Design/methodology/approach – House price dynamics are decomposed to analyse the influence of land and structure components for the city of Perth, Australia both at aggregate level and for spatially defined housing sub-regions, sample period 1995-2010. Findings – Values of land and improvements on that land evolve differently over time and are significantly influenced by the magnitude of land leverage. The study extends previous research through extensive spatial disaggregation of a larger more detailed data set than previously used in studies of this type confirming significant variation in land leverage ratios, overall price change and growth rates for land and improvements in sub-regional markets defined by spatial criteria. Research limitations/implications – The results suggest an important role for policy development with respect to housing affordability and supply side regulation of land in large urban housing markets. Practical implications – The results suggest important implications for hedonic price analysis of housing markets. The inclusion of land leverage variables in hedonic regression could remove coefficient bias associated with omitted location amenity variables. Originality/value – The paper adapts methodology from previous studies but extends previous literature through detailed analysis of a large Australian housing market (Perth) enabling extensive spatial disaggregation of the sample and providing greater insight to spatial variation of land leverage than in previous studies.

The Postwar Restructuring of the British Housing and Labour Markets: A Critical Comment on Thorns

1984 ◽  
Vol 16 (2) ◽  
pp. 147-161 ◽  
Author(s):  
C Hamnett
Keyword(s):  
World War Ii ◽  
Social Inequalities ◽  
House Prices ◽  
Regional Scale ◽  
House Price ◽  
Property Market ◽  
World War ◽  
Price Inflation ◽  
Property Markets ◽  
Over Time

In a recent paper in this journal, Thorns sought to relate together changes in the labour and domestic property markets in Britain since World War II. He argued that it was important to analyse the operation of these markets and the extent to which they operate to reinforce social inequalities. In this paper, it is argued that, although the issues Thorns raises are important ones, his analysis and conclusions are marred by his treatment of regional differences and trends in the rate of house price inflation over time. By generalising from data over a single year, Thorns sought to show that there was a strong link between the gains received from the labour market and those from the domestic property market. Although there is no evidence at the regional level to support Thorns's assertions regarding the growth of interregional differentials in average house prices over time (if anything the evidence shows the reverse), it is suggested that the regional scale may not be the most appropriate scale of analysis, and some evidence is presented which indicates the possibility of growing inner-city/suburban differentials. Finally, it is argued that the concentration on owner occupiers may well obscure the equally, if not more important, changes which are occurring in the distribution of owner occupiers and council tenants. It is argued that there is a growing social and spatial polarisation between the two main tenures at the intraurban level; some evidence from London is presented to support this.

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