House Price Appreciation Among Elderly Home Owners in Australia

Abstract

This paper investigates whether the houses of elderly home owners appreciate at the same rate as the average house price appreciation rate in the market. For most elderly home owners, their well-being is strongly underpinned by their home ownership status, the value of their homes generally representing their most significant asset in old age. The viability of financial instruments such as reverse mortgages where elderly home owners effectively borrow against their housing equity also depend strongly on house prices appreciating enough to offset the outstanding loan balance at the end of the reverse mortgage tenure. This study employs the use of a panel dataset, the 2001-07 HILDA Survey, in order to examine the appreciation rates of the houses of elderly home owners compared to younger home owners. Ordinary least squares regression models are employed to estimate the impact of home owner's age on house price appreciation rates. The findings indicate that a home owner aged 65 or over suffers from a 5 percentage point discount in house price appreciation rate compared to younger home owners over the average sample observation period of 5.5 years. The annual appreciation rate is lowered by 0.13 (0.16) percentage points for each additional year a home owner is aged 65-74 (75 or over). The findings of this paper have important implications for the viability of housing asset-based instruments as retirement funding strategies in old age.