Optimal home purchase age and its determinants : a quantitative analysis

In view of the significant impacts of housing on both the individual utility and the macroeconomy, we formulate a dynamic life-cycle model that prescribes housing as a discrete choice variable to study the optimal age for individuals to purchase their first home and the various factors that influenc...

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Main Authors: Lau, Chzee An, Ng, Kai Weng, Tan, Terence Kiat Hao
Other Authors: Tang Yang
Format: Final Year Project
Language:English
Published: 2017
Subjects:
Online Access:http://hdl.handle.net/10356/70033
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Institution: Nanyang Technological University
Language: English
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spelling sg-ntu-dr.10356-700332019-12-10T13:37:06Z Optimal home purchase age and its determinants : a quantitative analysis Lau, Chzee An Ng, Kai Weng Tan, Terence Kiat Hao Tang Yang School of Humanities and Social Sciences DRNTU::Social sciences In view of the significant impacts of housing on both the individual utility and the macroeconomy, we formulate a dynamic life-cycle model that prescribes housing as a discrete choice variable to study the optimal age for individuals to purchase their first home and the various factors that influence this age. We first show that our results are coherent with actual historical economic events to demonstrate the validity of our model. In addition, we also perform a simulation to realistically evaluate how the optimal home purchase age will react to shocks in income, housing prices and housing utility. In general, adverse shocks induce individuals to defer their home purchases and allocate more towards non-housing consumption. However, the degree of response differs between anticipated and unanticipated shocks. When a shock is unanticipated, individuals only adjust their consumption patterns at the period the shock occurs. As a consequence, individuals sub-optimally under- or over-postpone their home purchase age as compared to the case of an anticipated shock. From our sensitivity analysis, we identify the determinants of the optimal home purchase age to be income, housing price and housing utility. In our cross-country comparison, it is found that houses are more valued in China than in the US. This observation may be attributed to their native cultural beliefs that housing will boost their social standing and that a house purchase should precede marriage. Bachelor of Arts 2017-04-10T04:28:13Z 2017-04-10T04:28:13Z 2017 Final Year Project (FYP) http://hdl.handle.net/10356/70033 en Nanyang Technological University 72 p. application/pdf
institution Nanyang Technological University
building NTU Library
country Singapore
collection DR-NTU
language English
topic DRNTU::Social sciences
spellingShingle DRNTU::Social sciences
Lau, Chzee An
Ng, Kai Weng
Tan, Terence Kiat Hao
Optimal home purchase age and its determinants : a quantitative analysis
description In view of the significant impacts of housing on both the individual utility and the macroeconomy, we formulate a dynamic life-cycle model that prescribes housing as a discrete choice variable to study the optimal age for individuals to purchase their first home and the various factors that influence this age. We first show that our results are coherent with actual historical economic events to demonstrate the validity of our model. In addition, we also perform a simulation to realistically evaluate how the optimal home purchase age will react to shocks in income, housing prices and housing utility. In general, adverse shocks induce individuals to defer their home purchases and allocate more towards non-housing consumption. However, the degree of response differs between anticipated and unanticipated shocks. When a shock is unanticipated, individuals only adjust their consumption patterns at the period the shock occurs. As a consequence, individuals sub-optimally under- or over-postpone their home purchase age as compared to the case of an anticipated shock. From our sensitivity analysis, we identify the determinants of the optimal home purchase age to be income, housing price and housing utility. In our cross-country comparison, it is found that houses are more valued in China than in the US. This observation may be attributed to their native cultural beliefs that housing will boost their social standing and that a house purchase should precede marriage.
author2 Tang Yang
author_facet Tang Yang
Lau, Chzee An
Ng, Kai Weng
Tan, Terence Kiat Hao
format Final Year Project
author Lau, Chzee An
Ng, Kai Weng
Tan, Terence Kiat Hao
author_sort Lau, Chzee An
title Optimal home purchase age and its determinants : a quantitative analysis
title_short Optimal home purchase age and its determinants : a quantitative analysis
title_full Optimal home purchase age and its determinants : a quantitative analysis
title_fullStr Optimal home purchase age and its determinants : a quantitative analysis
title_full_unstemmed Optimal home purchase age and its determinants : a quantitative analysis
title_sort optimal home purchase age and its determinants : a quantitative analysis
publishDate 2017
url http://hdl.handle.net/10356/70033
_version_ 1681043953021878272