Mortgage-equity release: the potential of housing wealth for future Dutch retirees

Toussaint, Janneke

doi:10.1007/s10901-012-9301-x

Cited by 11 publications

(4 citation statements)

References 32 publications

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“…As is often the case in many areas of housing research, the current literature discourse has mostly focused on situations or case studies in West European countries (Costa-Font et al, 2010 for Spain; De Decker and Dewilde, 2010 for Belgium; Fahey, 2003 for Ireland; Gibler and Tyvimaa, 2015 for Finland; Haurin and Moulton, 2017 for the United States and European Union (EU); Herbers et al, 2014 for Denmark, Sweden and the Netherlands; Leviton, 2001 for the United States; Ong et al, 2013 for Australia and the United Kingdom; Ong et al, 2015 for Australia; Parkinson et al, 2009 for Australia and Britain; Sherraden, 1991 for the United States; Toussaint, 2013 for the Netherlands; Toussaint and Elsinga, 2009; Ronald, 2015 for the United Kingdom), with some rare publications also on East Asia (Chou et al, 2006; Hirayama, 2010; Ronald and Doling, 2012; Yoo and Koo, 2008). However, the post-socialist countries of Central and Eastern Europe (CEE) have, this far, been only minimally included in the academic discourse on the subject.…”

Section: Introductionmentioning

confidence: 99%

Asset-based welfare: Is housing equity release a viable option for pensioners in Slovenia

Sendi

Hrast

Kerbler

2018

Journal of European Social Policy

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The transformations in the welfare state regimes that have occurred globally, over the last three decades or so, have seriously affected the capacity of states to sustain the previous levels of social care and protection. These changes, already being manifested, inter alia, in trends in declining earnings of pensioners have inspired some researchers in this field to explore alternative ways of mitigating their impact on the well-being of the elderly during the retirement period. One of the theories that has been advanced to this effect is the so-called asset-based welfare concept which suggests that the wealth accumulated by people in the form of housing assets presents a financial reservoir that may serve as a source of income for pensioners in time of need. To address these issues, a variety of mechanisms have been developed and presented as ‘equity release products’ that may be used by senior homeowners to improve their living situation. This article contributes to the debate from the perspective of a country in Central and Eastern Europe (CEE), a region that has been rarely included in the scholarly discourse on the topic. While there might have been some level of success in the implementation of these instruments in some countries, the survey findings presented and discussed in this article show that Slovenian elderly homeowners strongly reject all the equity release products that were presented to them as potential options for alleviating financial hardship in old age. These findings lead us to the conclusion that it is highly unlikely that Slovenian elderly homeowners would ever accept and exploit, at any meaningful level of uptake, the investigated equity release mechanisms.

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Section: Introductionmentioning

confidence: 99%

Asset-based welfare: Is housing equity release a viable option for pensioners in Slovenia

Sendi

Hrast

Kerbler

2018

Journal of European Social Policy

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“…Household housing wealth varies across households due to differences in the initial housing investment, mortgage debt, and capital gains and losses [2]. Toussaint [43] has found that, in the Netherlands, older households usually bought dwellings and used mortgages at the "right" time; thus, they have been able to profit from house price increases for a longer period. Relatively vulnerable groups tend to be more vulnerable in terms of access to housing mortgages because of their limited affordability.…”

Section: Literature Reviewmentioning

confidence: 99%

Difference in Housing Finance Usage and Its Impact on Housing Wealth Inequality in Urban China

Cui

2021

Land

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With the increasing importance of financial loans in home purchases in urban China, the role of housing loans in the accumulation of housing wealth needs to be unraveled. Using the data from the 2017 China Household Finance Survey (CHFS), this study investigates the use of housing loans and their impact on housing wealth inequality. It has been found that people with higher socioeconomic status and institutional advantages benefit more from housing provident fund loans and are more likely to fully invoke different financing channels to accumulate housing wealth. On the contrary, disadvantaged groups have to resort to costly market-based mortgages to finance their home purchases. This leads them to fall further behind in housing wealth accumulation. The spatial stratification of housing wealth accompanying the urban hierarchy was also observed and found to be closely linked to the type of housing loans. In this increasingly financialized era, relying on financial instruments in the process of household asset accumulation may further amplify the existing wealth inequality among social groups.

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“…From an investment perspective, Dutch households find home-ownership as an instrument that can be used to build equity and/or earn additional income to augment the regular pay cheque or pension (Boelhouwer, 2002;Haffner, 2008;Toussaint and Elsinga, 2010;Toussaint, 2013). Such practice evolves around buying an extra home to rent out in the private rental market and later selling it entirely when enough equity has been built.…”

Section: This Dissertation Examines Important Aspects Of House Price ...mentioning

confidence: 99%

Diffusion and Risks of House Prices in the Netherlands

Teye

2018

Architecture and the Built Environment

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The rate of home-ownership has increased significantly in many countries over the past decades. One motivating factor for this increase has been the creation of wealth through the accumulation of housing equity, which also forms the basic tenet of the asset-based welfare system. In generating the home equity, house price developments play an important role. Generally, house prices show an increasing trend over long time period, however, there are short-term negative appreciations that may have inherent risks for the housing equity. Following the 2007-08 Global Financial Crisis (GFC), for example, the collapse of house prices has caused many recent home buyers to run into negative equity. Some housing researchers and experts have suggested that a better understanding of the spatial diffusion mechanisms of house prices will aid resuscitating the housing market after the GFC. Others also advocated adopting insurance schemes to protect the home equity that yields the welfare benefits. Unfortunately, however, little research insight exists on the Dutch house price diffusion process, although there are empirical results for countries such as the UK, US and China, where the contexts differ from the Netherlands. Furthermore, the current existing home-value insurance scheme in the literature is found to be less efficient and eliminates only up to 50% of the house price risks. This dissertation covers important aspects of house price diffusion and risks in the Netherlands. The aim is to better understand the diffusion mechanism and the risks of house prices, while it also contributes to the measurement of these housing risks. More specifically, there are three objectives: first, to discover the diffusion mechanism of house prices in the Netherlands and the pattern particularly from the capital Amsterdam; second, to examine the spatial distribution of the house price risk; and third, to investigate the efficiency of the index-based home-value insurance for reducing the house price risk in the Dutch context. The diffusion mechanism relates to the so-called ripple or spillover effect, for which movements of house prices in one location temporarily or permanently spread over their influence to other regions. The risks analyses capture the probability of selling the residential property below the purchase price. The index-based home-value insurance scheme is concerned with the reduction of the house price risk, while its efficiency and loss coverage are analysed. The contributions of the dissertation are specifically elaborated in five chapters. The chapters are self-contained, four of them having been published separately in international journals and the other being currently under review. Chapter 2 is a literature study that presents the general trend and an overview of the risks in home-ownership. It particularly discusses the government mortgage guarantee and tax deduction, among other factors, which contribute to home-ownership in the Netherlands. Mortgage default risk and house price risk, which are the two important risks from the perspective of the home-owners are also discussed in the context of the Dutch market. Chapter 3 investigates the house price diffusion mechanism between the twelve provinces in the Netherlands. The methodology adopts a new Bayesian graphical approach which enables a data-driven identification of the important regions where the diffusion may predominantly emerge. Using quarterly house price indexes, the findings suggest that house price diffusion exists in the Netherlands with a pattern varying over the period of time. Focusing specifically on the period prior to the 2007-2008 Global Financial Crisis (GFC), the house price diffusion predominantly originated from Noord-Holland. House prices in Amsterdam – the capital and an important economic hub of the Netherlands, are more likely to diffuse to other parts of the country. Thus in Chapter 4, attention is paid to the house price diffusion pattern from the capital Amsterdam to the other Dutch regional housing markets. The Granger causality and cointegration techniques are used, while controlling for the important house price fundamentals. The results suggest a possible house price diffusion existing from Amsterdam to all regions in the Netherlands except for Zeeland. The strongest long-run impact of Amsterdam house price diffusion potentially occur in Utrecht. As one of the largest and most dynamic in the Netherlands, the Amsterdam housing market is itself an interesting case study. One part of Chapter 5, therefore, deals with the diffusion pattern by studying the spatial interrelationships between house prices in Amsterdam. The other part of the chapter studies the house price risks. Using the Granger causality test, a general causal flow of house prices is observed from the central business districts to the peripherals. Simple statistics similarly reveal that house prices grow faster and are more risky in the central business districts than those on the peripherals of the city. Chapter 6 is concerned with the efficiency and loss coverage of the index-based home-value insurance scheme. It proposes a modification of the index-based home-value insurances policy, which seeks to reduce the large idiosyncratic residual house price risks. The modification uses aggregate measures of the reference index. Using the hedonic and repeated sales indexes, the empirical analysis suggests the proposed modified scheme is highly efficient and may eliminate up to 70% of the residual risks. In general, the dissertation adopts innovative empirical methodological approach that combines standard statistical analyses and more recent and complex econometric modelling techniques in the study of the diffusion and risks of house prices in the Netherlands. The application of the graphical approach to the study of diffusions particularly in Chapter 3, is the first of its kind in the context of the housing market. Furthermore, this dissertation is among the first to entirely provide a comprehensive analysis and the much needed body of knowledge regarding the house price diffusion and risks for the highly regulated Dutch housing market. The results have important policy implications and applications for households, commercial investors and financial institutions in the Netherlands. The results may also generally apply and replicable in other countries and economies with similar housing market conditions.

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Mortgage-equity release: the potential of housing wealth for future Dutch retirees

Cited by 11 publications

References 32 publications

Asset-based welfare: Is housing equity release a viable option for pensioners in Slovenia

Asset-based welfare: Is housing equity release a viable option for pensioners in Slovenia

Difference in Housing Finance Usage and Its Impact on Housing Wealth Inequality in Urban China

Diffusion and Risks of House Prices in the Netherlands

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