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Working paper

Housing in the Household Portfolio and Implications for Retirement Saving: Some Initial Finding from SOFIE (WP 07/04)

Issue date: 
Thursday, 1 March 2007
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Publication category: 
JEL classification: 
D31 - Personal Income, Wealth, and Their Distributions
D91 - Intertemporal Household Choice; Life Cycle Models and Saving
J21 - Labor Force and Employment, Size, and Structure
J26 - Retirement; Retirement Policies
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This paper uses unit record data from a new panel survey (SOFIE) to study housing wealth in household portfolios.


Housing is an important sector of the economy. It has widespread implications for investment, banking, saving and employment. Home ownership has been linked to building social capital and a sense of community. Furthermore housing equity is a significant element of retirement accumulation for many New Zealanders. The Treasury maintains a programme of work related to housing, saving, wealth accumulation and retirement. The results of this contribute to Treasury's role in providing advice to the Minister and at the same time informing a wider group of external stakeholders.

This paper uses unit record data from a new panel survey (SOFIE) to study housing wealth in household portfolios. It then estimates the rates of saving that would be needed to smooth consumption between pre- and post-retirement. Finally it explores the effect of some home equity withdrawal on the required saving rates.

The main findings of this study are:

  • 60% of households are recorded as owning a home;
  • Almost half of home-owning households have no mortgage debt;
  • One in six households own residential investment property;
  • One in twelve households own a rental property;
  • Patterns of property ownership in New Zealand are similar to those in selected comparator countries;
  • Housing represents a major share of household wealth, and this share has risen in line with the increase in house prices;
  • The composition of household portfolios is comparable to other selected countries except for the USA ;
  • Empirical results indicate that even if households planned to draw down half of housing equity to support retirement income, the impact on the saving rate needed to smooth consumption would be modest.
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Table of Contents

List of Tables

List of Figures

1 Introduction

2 Data

3 Housing in the household portfolio

4 Saving for retirement - the model

5 Saving for retirement - results

6 Summary and conclusions



twp07-04.pdf (418 KB) pp. 30

List of Tables

List of Figures


An earlier draft of this paper was presented at a workshop held at the Reserve Bank of New Zealand, Wellington, 14 November 2006. For their helpful comments and suggestions, we would like to thank the workshop participants and our colleagues Stephen Glover and Peter Wilson. We gratefully acknowledge the research assistance of Wei Zhang. Thanks are also due to Mark Arthur, Tendayi Nyangoni, Johanna Prebble, Diane Ramsay, Nick Treadgold and John Upfold of Statistics New Zealand for their support with the data.


The views, opinions, findings, and conclusions or recommendations expressed in this Working Paper are strictly those of the author(s). They do not necessarily reflect the views of the New Zealand Treasury.  The Treasury takes no responsibility for any errors or omissions in, or for the correctness of, the information contained in these working papers. The paper is presented not as policy, but with a view to inform and stimulate wider debate.

Access to the data used in this study was provided by Statistics New Zealand in a secure environment designed to give effect to the confidentiality provisions of the Statistics Act 1975.  The results in this study and any errors contained therein are those of the authors, not Statistics New Zealand.


Last updated: 
Thursday, 18 October 2007