Housing Equity Withdrawal in Australia: Prevalence, Patterns and Motivations in Mid-to-late Life

Abstract

In an era of population ageing, the primary home is increasingly viewed as a personal resource that can perform a pension role in retirement. This article assesses the extent to which Australians aged 45 years and over withdraw housing equity through in situ mortgage equity withdrawal (MEW), downsizing and selling up. We find that the incidence of housing equity withdrawal has increased over the last decade despite a global financial crisis. MEW is the dominant form of equity release among those under pension age, while downsizing or selling up is more frequent among those above pension age. Downsizing and selling up are more likely to be prompted by adverse life events than MEW. Selling up is typically an option of last resort. Our findings offer insights into important debates around homeownership societies and the welfare role performed by owner-occupied housing in mid-to-late life.

Keywords::

• Housing equity withdrawal
• Mortgage equity withdrawal
• Downsizing
• Selling up

Acknowledgements

This work was supported by the Australian Housing and Urban Research Institute (AHURI) [grant number 84001]. This article uses unit record data from the Household, Income and Labour Dynamics in Australia (HILDA) Survey. The HILDA Project was initiated and is funded by the Australian Government Department of Social Services (DSS) and is managed by the Melbourne Institute of Applied Economic and Social Research (Melbourne Institute). The findings and views reported in this article, however, are those of the authors and should not be attributed to AHURI, DSS or the Melbourne Institute.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

¹ For more details, refer to the HILDA Survey website. http://www.melbourneinstitute.com/hilda/

² Typically downsizing to release housing equity involves purchasing a less expensive home. But a homeowner trading ‘up’ can still engage in HEW by over-mortgaging, that is, the homeowner takes out a much larger loan on the more expensive home and consequently holds less housing equity after the move. However, we do not focus on over-mortgaging due do the small number of owners who engage in this form of HEW in mid-to-late life.

³ However, the number of cases that fall under this scenario is only 51 or 0.2% of the person-period cases.

⁴ Under Australian legislation superannuation benefits cannot be accessed before age 55, commonly referred to as the preservation age. Under changes to this legislation Australians born after 1 July 1964 cannot access their superannuation wealth before turning 60 years of age. But the change is staggered if born between 1960 and 1964 with the preservation age steadily increasing in increments of one year from 56 years of age for those born 1 July 1960 until 60 years of age for those born 1 July 1964 (Australian Taxation Office, 2012).