January 12, 2015

House Price Shocks and Household Savings: evidence from Dutch administrative data

We study the effect of house price shocks on the savings behaviour of Dutch homeowners over the period 2006-2011. Using unique administrative data, we build a balanced panel of slightly less than 2 million Dutch home owning households, containing information on house values, wealth, income and other background characteristics.
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We find a negative relationship between house price changes and savings, with the largest effects for young households with negative housing equity. In our baseline specification, we find larger effects for house price increases compared to house price decreases. Households of age 30 with loan-to-value ratios above one, save roughly 3 euro less for a 100 euro increase in house prices, while they save around 1 euro more for a 100 euro decrease. The asymmetric effect of price declines versus increases holds in most, but not all specifications.


Nancy van Beers
Michiel Bijlsma
Remco Mocking