Housing Assets as a Potential Solution for Financial Hardship: Households’ Mental Accounts of Housing Wealth in Three European Countries

Abstract

The global financial crisis means that households in all EU countries must deal with income and asset insecurity. Life cycle theories predict that households will consume their savings in times of financial hardship and in retirement. However, thus far, housing assets have been consumed far less than other assets, though it has been suggested that the increased availability of additional mortgage borrowing will potentially change this. In this paper, household considerations about building and consuming housing equity are explored in Germany, Hungary and the UK. Based on empirical qualitative data, this paper presents an analysis of the potential role of housing assets in these countries now and in the near future.

Key Words:

• Housing assets
• Households’ financial strategies
• Mortgage equity withdrawal
• Life cycle theory
• Behavioural economics/finance

Acknowledgements

I wish to thank referees of Housing, Theory and Society, Gudran Tegeder, Ilse Helbrecht, József Hegedüs, Nóra Teller, Deborah Quilgars, Anwen Jones and other research partners within the OSIS project, and the support of the European Union for its funding of the project which has served as an inspiration for this paper (CIT2‐CT‐2003‐506007). An earlier version of this paper was presented at the conference “Financial institutions and economic security”, London, 21–22 May 2009.

Notes

1. Source: Eurostat; see http://epp.eurostat.ec.europa.eu/portal/page/portal/eurostat/home (accessed 1 October 2010).

2. It needs to be mentioned that the at risk of poverty rate in Hungary is based on official income statistics. These are however not very accurate due to a large black economy.

3. The relationship between house price increases, additional mortgage borrowing and hence additional consumption has been shown for various countries, including the UK (Catte et al. 2004).