Essays on Housing and Pensions: A European Perspective PDF
Preview Essays on Housing and Pensions: A European Perspective
Essays in Real Estate Research Band 15 Nico B. Rottke · Jan Mutl Hrsg. Thomas Müller Essays on Housing and Pensions A European Perspective Essays in Real Estate Research Band 15 Series editors N. B. Rottke, Frankfurt a. M., Germany J. Mutl, Wiesbaden, Germany Die Reihe „Essays in Real Estate Research“, herausgegeben von Profes- sor Dr. Nico B. Rottke FRICS und Professor Jan Mutl, Ph.D. umfasst aktu- elle Forschungsarbeiten der Promovenden der Lehrstühle und Professuren des Real Estate Management Institutes der EBS Business School. Forschungs- und Lehrschwerpunkte des Institutes bilden die interdisziplinären Aspekte der Immobilientransaktion sowie die nachhaltige Wertschöpfungskette im Immo- bilienlebenszyklus. Die Kapitalmärkte werden als essenzieller Bestandteil der Entwicklung der Immobilienmärkte aufgefasst. Die in der Regel empirischen Studien betrachten transaktions- und kapitalmarktnahe Themenbereiche aus dem Blickwinkel der institutionellen Immobiliengewerbe- und -wohnungswirtschaft, wie bspw. Finanzierung, Kapitalmarktstruktur, Investition, Risikomanagement, Bewertung, Ökonomie oder Portfoliomanagement, aber auch angewandte The- men wie Corporate Real Estate Management, Projektentwicklung oder Unterne- hmensführung. Die ersten 11 Bände der Reihe erschienen bis 2014 auch im Immobilien Manager Verlag, Köln. The series “Essays in Real Estate Research”, published by Professor Dr. Nico B. Rottke FRICS and Professor Jan Mutl, Ph.D., includes current research work of doctoral students at the chairs and professorships of the Real Estate Management Institute of EBS Business School. The research and teaching focus of the Institute constitutes the interdisciplinary aspects of real estate transactions as well as the sustainable value creation chain within the real estate life cycle. The capital mar- kets are regarded as essential components of the development of the real estate markets. The mostly empirical studies consider transactional as well as capital market topicsfrom the point of view of the institutional commercial and residen- tial real estate industry, such as finance, capital market structure, investment, risk management, valuation, economics or portfolio management, but also applied topics such as corporate real estate management, real estate development, or lead- ership issues in the property industry. The first 11 volumes of the series appeared up until 2014 in Immobilien Manager Publishing, Cologne, as well. More information about this series at http://www.springer.com/series/13911 Thomas Müller Essays on Housing and Pensions A European Perspective With a Foreword by Professor Dr. Nico B. Rottke and Professor Jan Mutl, PhD Thomas Müller Real Estate Management Institute EBS Universität für Wirtschaft und Recht Wiesbaden, Germany Doctoral Thesis, EBS Business School, EBS Universität für Wirtschaft und Recht, Wiesbaden, Germany, 2018 ISSN 2570-2246 ISSN 2570-2254 (electronic) Essays in Real Estate Research ISBN 978-3-658-24954-0 ISBN 978-3-658-24955-7 (eBook) https://doi.org/10.1007/978-3-658-24955-7 Library of Congress Control Number: 2018965574 Springer Gabler © Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2019 This work is subject to copyright. All rights are reserved by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, express or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. This Springer Gabler imprint is published by the registered company Springer Fachmedien Wiesbaden GmbH part of Springer Nature The registered company address is: Abraham-Lincoln-Str. 46, 65189 Wiesbaden, Germany To my daughter Lilly, who will inherit our present decisions Foreword Coveringtopicsofrelevanceandproposingsolutionsarethekeydriversofsuccessful scientific works in social sciences. Our publication series “Essays in Real Estate Research” welcomesrelevanttopicsthatareabletocreateanimpact. Thepresent publication is highly relevant as it touches upon a subject which concerns us all: Howtosecureadequatepensionsinanagingsociety. Sincetheshiftinagestructureasthemaindriverforincreasingpensionexpenditures isnoteasilyreversible,wewillfaceanenormouschallengewhentryingtoensuread- equatepensionsforcurrentandfuturepensioners. AsmostoftheEuropeanpension systemsareestablishedasso-calledPAYGsystems,currentworkersfinancecurrent pensioners. An increasing share of pensioners puts inevitably a greater financial burdenoncurrentworkers. Withoutfurthercompensation,anagingsocietywillsoon sufferfromincomelosses. Thiseffectofthedemographicchangeiswellknownandits consequenceslongdebated,butasatisfyingsolutionisnotyetimplementedinfuture pension policies. The loss of adequate pensions for most of the European elderly is still imminent. European governments are struggling with serious solutions as theirlargestvoterpotentialconsistsofpensionersorworkersjustbeforeretirement, e.g.,thelargecohortofthebabyboomerwhichwillretireinthenearfuture. But ifwearenothonestwithourselves,acceptthesefuturechallenges,andimplement soundsolutions,takenactionscanonlytreatthesymptomsinsteadofcontributing tofundamentalchanges. Lookingattheassetdistributionwithinasocietyratherthanattheincomedistribu- tionwhenassessingpensionadequacy,asthisworkproposes,isaninnovativesolution. Assetscanbeincome-producingaswell,whetherinkindorincash. Focusingonhous- ingasthemostvaluableassetinaEuropeanhouseholdportfolioisstraightforward. Theauthorshowsthatincomederivedfromhousingcanhelptoalleviatefinancial distress in old age. Providing access to housing and thus enabling households to accumulatehousingwealthmustbeacrucialpolicygoalforallEuropeanmember states. Itcannotbetakenforgranted,asinter-andintra-generationaldifferencesin housingwealthshowalreadyexistinginequalities. Theseresultfromaprogressing segmentationofthehousingmarketandindividualincomeandborrowingconstraints, reasonsthatcanbeaddressedinpolicymeasures. Inthat,awell-directedhousing policyisessentialforasuccessfulwelfarepolicy. Inhisempiricalwork,theauthorclearlydemonstratesthathomeownershipisalready part of a household’s welfare planning. Income from housing is an accepted and applied supplement for public pension income. With more and more pressurized pensionsystemsahead,oneconclusionisobvious: Futurepensionerswillhavetorely VIII Foreword onthevalueinherentintheirassets. Furthermore,theyhavetobeenabledtorelease thisvalueinoldage. ThisinsightiscrucialforEuropeanlegislatorsasabasisfor awell-reasonedhousingandpensionpolicywithregardtofuturepensionneedsof Europeanelderly. Thepresentworkisabletocreateanimpactbyprovidingconcretepolicysuggestions as a result of a sound analysis regarding the importance of housing wealth in the Europeanhouseholdportfolio. ItcangiveEuropeanpolicymakersfoodforthought andinspiretheirwork. Itisintheirhandstocreatemoresustainableandadequate pensionsystems. ProfessorDr. NicoB.Rottke ProfessorJanMutl,PhD Preface ThedemographicchangeinEuropeisamegatrendthatisformative. Thelongerits driversprevail,thestrongerwillbeitseffectonourpolitical,social,andeconomical life. TheresultingchangeintheagestructureoftheEuropeanpopulationcallsfor consequencesinmanyfields. Therefore,researchontheeffectsofthismegatrend is especially valuable to our society. In combination with proposed solutions it is evenmorevaluable. Adaptationstoachangingenvironmentarethetaskofcurrent generationstosecurelivingconditionsoffuturegenerations. Theaimofthisthesisistocontributetointensifieddiscussionsonsecuringadequate pensionsinanasset-basedwelfaresystem. Itputshousingasacentralpillar. There- fore,itgivesananswertooneofthemostpressingquestionsthatcurrentgenerations havetoanswer: Howtoprovideadequateretirementincomefortheelderly? Thisthesiswasonlypossiblewiththekindsupportandhelpofmanyindividuals. I wouldliketoextendmysincerethankstoallofthem. First,Iwouldliketothankmyfirstsupervisor,Prof. Dr. NicoB.Rottkeforproviding mewiththepossibilitytowritemythesisattheRealEstateManagementInstitute ofEBSUniversity. Withouthistrustinmycapabilities,hisacademicsupportandhis helpfuladvicethroughouttheprocessofwritingandresearching,thisthesiswould nothavebeenpossible. Iwouldalsoliketogratefullythankmysecondsupervisor, Prof. JanMutl,PhD,forbeingalwaysapproachableformethodologicalaswellas contentissuesduringthisperiod. Furthermore,Iamalsoindebtedtoacknowledge theveryvaluablecommentsandsuggestionsforimprovementfromProf. Dr. Joachim Zietz. Hisrevisionsadvancedthisthesisalot. Second,IwouldliketoexpressmygratitudetoEBSUniversity,especiallytheReal EstateManagementInstitute(REMI),andallresearchcolleaguesfortheirsupport and fruitful discussions in our doctoral seminars. I’m also very grateful for the valuable comments I received during my presentation at the 22nd European Real EstateSocietyConferenceinIstanbul. Overall,thelecturesanddiscussionswhichI attendedandthepeopleImetwerearealenrichmentformyacademiclife. Finally,Iwouldliketosincerelythankmyparentsandmywifefortheirunfailing supportandcontinuousencouragement. Thisaccomplishmentwouldnothavebeen possiblewithoutthem. Dr. ThomasMüller Contents List of Figures XIII List of Tables XV List of Abbreviations XVII 1 Introduction 1 1.1 MotivationandProblemDefinition . . . . . . . . . . . . . . . . . . . 1 1.2 ThesisStructure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2 The Trade-off between Housing and Pensions 5 2.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.2 TheTrade-offTheory . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.3 AnalyticalFramework . . . . . . . . . . . . . . . . . . . . . . . . . . 8 2.3.1 Theory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 2.3.2 EconometricSpecification . . . . . . . . . . . . . . . . . . . . 10 2.4 Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 2.5 RegressionResults . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 2.6 Conclusion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 3 Do Europeans Release Their Housing Wealth in Old Age? 21 3.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 3.2 Life-CycleTheoryandHousingWealthDecumulation . . . . . . . . . 22 3.3 EmpiricalModel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 3.4 Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 3.5 RegressionResults . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 3.6 InternationalDifferences . . . . . . . . . . . . . . . . . . . . . . . . . 31 3.7 Conclusion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 4 Housing as a Pension: Policy Implications for Europe 37 4.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 4.2 KeyChallengesfortheEuropeanPublicPensionSystems . . . . . . . 38 4.2.1 DemographicAging. . . . . . . . . . . . . . . . . . . . . . . . 39 4.2.2 FinancialandEconomicCrisis . . . . . . . . . . . . . . . . . . 41 4.2.3 EffectsonPensionSystems. . . . . . . . . . . . . . . . . . . . 41 4.3 TheRoleofHousingforAdequateIncomeinOldAge . . . . . . . . . 45 4.3.1 HousingasanIncomeSourceinOldAge . . . . . . . . . . . . 45 4.3.2 PerceptionofHousingasaPension . . . . . . . . . . . . . . . 48 4.4 EconomicTheoryandEmpiricalEvidence . . . . . . . . . . . . . . . 50
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