Housing Wealth Effects for Private and Subsidized Homeowners

Wong SK, Deng KK & Cheung KS "Housing Wealth Effects for Private and Subsidized Homeowners", International Journal of Housing Markets and Analysis, doi: 10.1108/IJHMA-07-2017-0067 (2018/Forthcoming)

28 Pages Posted: 24 Aug 2018

See all articles by Siu Kei Wong

Siu Kei Wong

University of Hong Kong

Kuang Kuang Deng

Shanghai University of Finance and Economics

K. S. Cheung

University of Auckland

Date Written: September 15, 2017

Abstract

This study examines the effect of housing wealth on household consumption when there are resale (including refinancing) constraints that prevent housing assets from being cashed out. Based on household-level expenditure data in Hong Kong, two resale constraints are found to have weakened the housing wealth effect. The first one applies to subsidized homeowners who are not allowed to resell their units before sharing their capital gain with the government. A significant housing wealth effect is found among private homeowners, but not subsidized homeowners. The second one applies to private homeowners whose recourse mortgages go “underwater” – they have to repay the outstanding loan to the bank before they can resell their units. In this case, the housing wealth effect becomes weaker even among private owners. The results remain robust after the application of more rigorous sample selection through propensity score matching.

Keywords: housing wealth; negative equity; subsidized housing

JEL Classification: E21, R20, R31, R38, C21

Suggested Citation

Wong, Siu Kei and Deng, Kuang Kuang and Cheung, K. S., Housing Wealth Effects for Private and Subsidized Homeowners (September 15, 2017). Wong SK, Deng KK & Cheung KS "Housing Wealth Effects for Private and Subsidized Homeowners", International Journal of Housing Markets and Analysis, doi: 10.1108/IJHMA-07-2017-0067 (2018/Forthcoming), Available at SSRN: https://ssrn.com/abstract=3231645

Siu Kei Wong (Contact Author)

University of Hong Kong ( email )

Pokfulam Road
Hong Kong, HK
China

Kuang Kuang Deng

Shanghai University of Finance and Economics ( email )

Shanghai, 200433
China

K. S. Cheung

University of Auckland ( email )

Private Bag 92019
Auckland Mail Centre
Auckland, 1142
New Zealand

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