House Prices, Second Mortgages and Household Savings: An Empirical Investigation for the Netherlands, 1987-1994

Tinbergen Institute 2002-074/3

25 Pages Posted: 3 Nov 2002

See all articles by Jan Rouwendal

Jan Rouwendal

VU University Amsterdam - Department of Spatial Economics; Tinbergen Institute

Rob Alessie

Utrecht University - School of Economics; VU University Amsterdam - Department of Economics

Date Written: June 20, 2002

Abstract

Since the beginnings of the eighties house prices in the Netherlands have increased steadily and considerably. In this paper we study the effect of this development on the demand for second mortgages and on the savings of Dutch households. We use the data of the Dutch socio-economic panel for the years 1987-1994. These data contain self-reported values of the houses of owner-occupiers, which are shown to correspond to the median sales prices provided by the Dutch Association of Realtors. Households therefore seem to be well aware of the increase in the value of their house. We use panel data methods to investigate the effect of house prices on (i) the number and size of second mortgages, (ii) the savings of owner-occupiers and (iii) the savings of renters that may be considered as would-be owners. We find a significant effect of home equity on the demand for second mortgages. Savings of homeowners decrease when house prices accelerate. We find no evidence that increased demand for mortgage loans is caused by substitution from other forms of consumer credit. Contrary to results reported in the literature, we find no evidence of an increase in savings of would-be owners caused by higher house prices.

Keywords: House Prices, Mortgages, Savings, Consumption, Panel Data

JEL Classification: E21, G21, R31

Suggested Citation

Rouwendal, Jan and Alessie, R.J.M. (Rob), House Prices, Second Mortgages and Household Savings: An Empirical Investigation for the Netherlands, 1987-1994 (June 20, 2002). Tinbergen Institute 2002-074/3. Available at SSRN: https://ssrn.com/abstract=321022 or http://dx.doi.org/10.2139/ssrn.321022

Jan Rouwendal (Contact Author)

VU University Amsterdam - Department of Spatial Economics ( email )

De Boelelaan 1105
1081HV Amsterdam
Netherlands

Tinbergen Institute ( email )

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

R.J.M. (Rob) Alessie

Utrecht University - School of Economics ( email )

Kriekenpitplein 21-22
Adam Smith Building
Utrecht, 3584 EC
Netherlands
31 30 253 9814 (Phone)
31 30 253 7373 (Fax)

HOME PAGE: http://www2.econ.uu.nl/users/alessie/

VU University Amsterdam - Department of Economics ( email )

De Boelelaan 1105
1081 HV Amsterdam
Netherlands
+31 20 444 6047 (Phone)
+31 20 444 6005 (Fax)

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