Homeownership and Loan Financing　-A Comparison of Loan Payment vs. Imputed Rent,and Outstanding Debt vs. Home Market Value

Tatsuya Ishikawa

Introduction

According to the Family Income and Expenditure Survey(Ministry of Public Management， Home Affairs， Posts and Telecommunications)， loan payments on housing and land purchases comprised a record 19.9% of the disposable income of homeowners with loans (employed households) in 2001. With only 80.1% of disposable income left to consume or save， these households no doubt must feel a heavy loan burden. On the other hand， loan payments do not always depress consumption because homeowners earn and consume imputed rent. When adjusted for imputed rend， the propensity to consume is not necessarily declining relative to other households. In addition， the problems derived form home loans may not be limited to the savings rate and propensity to consume.

The problems confronting homeowners with loan payments can be divided into those specific to such households， those shared by all homeowners， and those shared by all households including renters. To obtain an accurate perspective of loan problems， we must adopt a broad perspective and compare these three types of households， rather than simply focusing on loan burdens.

This paper first compares homeowners with loan payments， homeowners without loan payments， and renters with respect to income and expenditure flows， and shows that the loan payment of homeowners is not necessarily large relative to income. To do so， we estimate imputed rent， with which we adjust disposable income and savings rate. Next， we examine why the loan-to-income ratio has increased， focusing on the relationship between outstanding debt， loan payment， and annual income. We also discuss the growing availability， term， and size of loans relative to income in connection with the lending stance of financial institutions and tax incentives.

We then estimate unrealized gains or losses on the market value of properties by year of purchase， and examine the problem of the declining net worth of owned homes in light of the real increase in debt due to deflation. Finally， we present our summary and conclusions.

Homeownership and Loan Financing -A Comparison of Loan Payment vs. Imputed Rent,and Outstanding Debt vs. Home Market Value

Tatsuya Ishikawa

Homeownership and Loan Financing　-A Comparison of Loan Payment vs. Imputed Rent,and Outstanding Debt vs. Home Market Value