Current Wealth,Housing Purchase,and Private Housing Loan Demand in Japan

Japanese households accumulate wealth for down payments at a high rate. Therefore, current wealth plays an important role in home acquisition as well as public loans whose direct mortgage lending is a strong support for home purchasers. We estimate the wealth effect on private mortgage debt as well as housing consumption by applying a model where mortgage-debt demand is derived from house-purchase decisions and is determined jointly with housing consumption. We use a simultaneous equation Tobit estimation method. Wealth effects on private mortgage debt, likelihood of borrowing, and housing consumption are not elastic. On the other hand, a change in housing consumption affects the likelihood of borrowing elastically much more than the private mortgage amount of borrowers. Housing and private mortgage markets fluctuate very closely with the number of participants in the mortgage market. Therefore, the number of housing starts is linked strongly to the private mortgage market.