Technical Report Housing assets and consumption among the Japanese elderly

Iwata, Shinichiro  ,  Yukutake, Norifumi

A large proportion of the Japanese elderly have accumulated assets in the form of housing wealth. The elderly expect to fund consumption during their retirement by releasing housing equity. This paper estimates a fixed effects model to examine the causal effect of housing assets on consumption, using panel data of Japanese elderly households from 2006 to 2015. Contrary to the above expectation, the results suggest that changes in housing wealth do not significantly increase elderly consumption. The reason behind this result appears to be that the elderly homeowners cannot release part of their housing wealth as cash through the financial sector. Instead, elderly homeowners leave their housing assets to their children, and in exchange, receive cash to fund consumption. The impact on consumption, however, is rather small. Moreover, this mechanism tends to operate only in urban areas where the land values are relatively high. These results imply that housing wealth is available to only a limited proportion of Japanese elderly homeowners.

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