RDP 2006-08: A Survey of Housing Equity Withdrawal and Injection in Australia 3. The Survey

3.1 Design

The RBA's survey of Australian households builds on these earlier surveys in several important respects. The aforementioned surveys examined the withdrawal or injection of equity associated with individual events, whereas the survey undertaken for this paper focused on net injection or withdrawal over the course of a calendar year. This approach ensures coverage of injections as a result of regular or lump-sum principal repayments – important forms of injection not captured by these earlier surveys. Other forms of injection, including renovations, were also dealt with more comprehensively in this survey by capturing renovations that were financed without debt. In another advance, the survey asked respondents about inherited residential property and funds received from the sale of inherited property. This is necessary because sales of deceased estates result in an equity withdrawal, which otherwise would not be captured. The survey also collected information on the features of each household's mortgage to assist in gauging the importance of financial innovations to housing equity flows.

The RBA engaged Roy Morgan Research (RMR) to assist in questionnaire design and conduct the survey. The results in this paper are based on 4,500 respondent households, interviewed by telephone in February 2005.

The myriad of ways in which households can withdraw or inject housing equity required a questionnaire with different paths depending on the behaviour of the household. At its core, the questionnaire asked for data relating to changes in housing-secured debt and housing-related transactions over 2004. Respondents were asked about the characteristics of their property holdings, followed by questions to determine how their housing equity had changed over 2004. From these responses, it was possible to determine whether the household was a net withdrawer, injector or neither. Finally, there were questions about the use of funds by withdrawers and source of funds for injectors. Further information on survey design, fieldwork, data preparation and sample characteristics is available in Appendix B. An abridged copy of the survey and the raw data are available on request from Economic Publications.

3.2 Calculating Equity Withdrawal and Injection

Over a given period, households may undertake a number of housing equity withdrawals and injections or take no such actions at all. For the purpose of analysis, households were divided into withdrawers and injectors on the basis of the net result of their actions over 2004. That is, over 2004, a household made a net equity withdrawal if the change in housing debt minus the change in housing equity from property transactions (including inheritances flowing from the sale of property) minus renovation expenditure was greater than zero. Similarly, a household made a net equity injection if this calculation was less than zero. These calculations are described in further detail in Appendix C.

In analysing the results, households identified as having withdrawn or injected net equity over 2004 were classified into two further broad sub-groups: transactors in the property market, and non-transactors.

The group of households that undertook property transactions includes: households that reduced their property holdings; households that increased their property holdings, often as a first-home buyer or an investor; and those that were both buyers and sellers. For the bulk of this group, the housing equity flows associated with their transactions were the main drivers of whether they made a net withdrawal or injection over 2004.

Non-transacting property owners that injected equity did so by paying down principal on existing debt or through renovations financed, at least partly, from their own funds. Those that withdrew equity increased housing-secured debt via methods such as refinancing or drawing down a home-equity style loan. Households that withdrew in this way included some renovators, where the increase in housing-secured debt exceeded the amount spent on renovations.