RDP 2006-08: A Survey of Housing Equity Withdrawal and Injection in Australia 6. Uses and Sources of Funds

6.1 Uses of Funds by Equity Withdrawers

The survey asked all households that withdrew equity (in net terms) over 2004 what they did with the funds withdrawn. Respondents were prompted with a number of possible answers, including using the funds for various types of consumption, the purchase of various assets, and the repayment of non-housing-related debt. Overall, the results suggest that, while a significant share (18 per cent) of the equity they withdrew over the year was used mainly for consumption, the bulk (58 per cent) was used mainly for asset accumulation, with an additional 8 per cent used mainly to pay down other debt (Table 10).[15] Around 10 per cent of funds withdrawn were associated with a respondent that could not (or would not) say how the funds had been used.

Table 10: Households Withdrawing Equity: Main Use of Funds
Per cent
  Non-transactors   Property transactors   All methods
Share of all households Share of value withdrawn by this method Share of all households Share of value withdrawn by this method Share of all households Share of total value withdrawn
Household expenditure 3.4 29.7   0.7 13.0   4.0 17.6
Of which:
Redecorations/durables etc 1.5 13.0   0.3 6.9   1.8 8.6
Car 1.3 12.0   0.2 3.6   1.5 5.9
Holiday 0.5 2.9   0.2 1.3   0.6 1.7
Living expenses 0.1 1.8   0.1 1.2   0.2 1.4
Asset accumulation 1.6 41.0   2.3 65.2   3.9 58.5
Of which:
Deposits 0.6 18.6   1.3 38.6   1.9 33.0
Superannuation 0.0 1.5   0.2 5.8   0.2 4.6
Household business 0.3 4.9   0.1 2.0   0.5 2.8
Commercial property 0.1 5.9   0.1 0.4   0.1 1.9
Other non-property investments 0.5 10.2   0.6 18.4   1.2 16.1
Repay other debt 0.7 8.3   0.4 7.4   1.2 7.7
Other 0.6 4.6   0.4 7.1   1.0 6.4
Cannot say 1.1 16.4   0.6 7.3   1.7 9.8
Total 7.3 100.0   4.4 100.0   11.7 100.0
Notes: Components may not sum due to rounding, and calculations involve some imputation. Also, for each household, the full value of withdrawn equity has been apportioned to the specified main use of funds.

The largest category of assets accumulated with withdrawn funds was deposits, accounting for around one-third of all withdrawn funds. Over a half of these deposits (by value) were from households that intended to use these funds to either purchase or renovate residential property at a later date, with only 16 per cent (by value) intended to be left on deposit during 2005. Other forms of asset accumulation included investing in household businesses (3 per cent of withdrawn funds), commercial property (2 per cent), superannuation (5 per cent) and other non-property investments (16 per cent) such as equities.

The results also show that the use of funds varied considerably with the method of equity withdrawal. Non-transacting households that withdrew equity were much more likely to mainly use the funds to finance consumption than were households that engaged in a property transaction and withdrew equity. Of non-transactors that withdrew equity and identified a specific use for the funds, over half indicated consumption spending, including home redecorations, holidays, consumer durables and motor vehicles. A further 5 per cent of these households cited consumption as one, but not the main, use of the withdrawn equity.

In contrast, only about one-fifth of transactors that withdrew equity and identified a specific use for the withdrawal indicated that the main use was to finance consumption. The more typical response was that the funds withdrawn were allocated to other assets. Households that withdrew larger amounts were more likely to specify a use of funds, probably reflecting the greater significance attached to larger expenditures.

6.2 Alternative Sources of Funds for Equity Withdrawers

Households that withdrew equity over 2004 were also asked what they would have done had they not been able to withdraw equity from their residential property. This provides some indication as to the role of housing equity in facilitating these transactions. Over half of those that withdrew equity during 2004 said that they would not have otherwise raised the funds; over a quarter said they would have applied for a loan or used their credit card; and around 10 per cent said they would have run down their savings (Table 11).

Table 11: Alternative Source of Funds if not Withdrawn Housing Equity
Per cent of net withdrawers that would have:
  Non-transactors Property transactors Total
Not raised funds at all 54.4 61.0 56.8
Other secured loan 19.5 11.9 16.7
Run down savings 9.9 10.5 10.1
Credit card 8.6 5.9 7.6
Other unsecured loan 8.7 2.4 6.3
Other property-secured loan 1.1 0.0 0.7
Other sources 6.6 8.3 7.2
Cannot say 1.1 3.6 2.0

Notes: Columns sum to more than 100 per cent as some households provided multiple answers. Calculations involve some imputation.

Transactors were less likely than non-transactors to seek alternative sources of funds if they had not been able to access them via housing equity withdrawal – consistent with the earlier discussion that transactors' decisions to withdraw or inject equity may often be secondary to their decisions to undertake property transactions. Those households using the funds for consumption were slightly more likely than other withdrawers to say that they would have accessed the funds from other sources if housing equity withdrawal had not been available to them.

The large proportion of non-transactor households that would not have otherwise raised funds suggests that their withdrawal of equity was in large part supported by the ease and relatively low cost of obtaining funds in this way. For transacting households the implications are less clear – raising funds may have been a by-product of their decision to transact for other reasons.

6.3 Sources of Funds for Equity Injectors

Just as the use of withdrawn funds has implications for household spending, so too may the source of injected funds, since these funds could otherwise have been used for consumption purposes. For the 16 per cent of households that injected equity solely by making regular payments on their mortgage, income was presumably the main source of funds. Of the households making typically larger lump-sum injections, around half reported that they financed those injections primarily through drawing on savings and other assets, and around a quarter reported that they financed them from their regular income, with the remainder coming from various other sources (Table 12).

Table 12: Source of Funds for Lump-sum Injectors
(per cent)
Property transactors
(per cent)
(per cent)
Savings 34.8 22.9 30.4 19,000
Income 25.0 23.7 24.5 20,000
Sale of other assets 15.0 30.4 20.6 73,000
Inheritance 4.1 2.7 3.5 80,000
Loan from friends or family 0.5 2.7 1.3
Gift received 1.0 2.7 1.6
Other 19.6 15.0 17.9 20,900
Note: Medians are not reported where sample size is very small.


This analysis apportions the full value of equity withdrawn by each household to the main use. An alternative approach is to split the withdrawn funds evenly between the identified uses when multiple uses were identified, and to assume that all households that did not report a use used the funds for consumption. This suggests that around 30 per cent of the funds withdrawn by all households withdrawing equity over 2004 were used for consumption. [15]