Home ownership in Amsterdam : a home as a financial resource for non-housing expenditures at a later age

Home ownership in

Amsterdam

A home as a financial resource

for non-housing expenditures at a

later age

Niels Gersonius

2

COLOPHON

Title: Home ownership in Amsterdam.

A home as a financial resource for non-housing expenditures at a later age

Keywords: Amsterdam, Financial resource, Home ownership, Housing equity,

Non-housing expenditures, Pensions

Author: Niels Gersonius

Student No. 10593136

University: University of Amsterdam

Faculty of Social and Behavioural Sciences Bachelor Human Geography and Planning

Supervisor: Dhr. Prof. Dr. R. (Richard) Ronald

Associate Professor at the Centre for Urban Studies at the University of Amsterdam

Place: Amsterdam

3

Preface

This is my thesis about home ownership in Amsterdam - the home as a financial resource for non-housing expenditures at a later age. This research is part of my graduation from the University of Amsterdam. After I started the bachelor Human Geography and Planning in September 2013, it comes to an end in early 2017.

My interest in housing comes from two courses that I have followed during my bachelor at the University of Amsterdam: Wonen & Woonbeleid (Housing and Housing policy) and Perspectives on Home and Housing. The subjects that were discussed during these courses were not only fascinating, but also very topical. On the radio, on television, in the newspapers and on the Internet, housing is often discussed in the news. In the summer of 2016, during my internship at the municipality of Zaanstad, issues on housing were on the agenda again. After that, I decided to write my thesis about home ownership. The developments in the Amsterdam housing market made me choose for

Amsterdam as research area.

I would like to thank my supervisor Mr. Ronald for the guidance and support during the process. Also I would like to thank Mr. Lute, Mr. Stanco, Mr. Nijman and the survey respondents for their contribution to this research. I could not have been able to complete this research without them.

I hope you enjoy reading this thesis.

Niels Gersonius

Castricum, January 2017

4

Summary

Retrenchments of the Dutch welfare state pertains to various costs, like costs for social welfare provisions, which means there is more responsibility for the Dutch citizens to self-fund, for example, their pensions (Toussaint & Elsinga, 2010). One way to finance these costs in the future is using the house to compensate these costs, by releasing housing equity. Due to the rising house prices in Amsterdam, it could be useful for homeowners in Amsterdam.

The goal of this research is to find out to what extent homeowners in Amsterdam consider their home as a financial investment which they can use at later age to, for example, pay for social care, health care or pension costs. In addition, the goal is to find out what key motivations people had to buy a home in Amsterdam, if the potential financial benefit of home ownership played a role in the decision and whether this can be related to the (expected) rising housing prices in Amsterdam. The research question is as follows: To what extent do homeowners in Amsterdam consider their home as a

financial resource for non-housing expenditures at a later age?

In order to be able to answer this research question, there is made use of surveys and structured-interviews. The questions are about the motivations to become a homeowner in Amsterdam and about releasing housing equity. Being independent of a landlord and the feeling of security of controlling the own home appear to be the primary motivations for people to become a homeowner in Amsterdam. For about 75 percent of the people, the possibility to use the home as an investment for later life is a motivation for home ownership. Most frequently, people consider their home as a financial resource to pay for their pension costs during retirement: the home as an income in kind. There is no relation between these motivations and the rising house prices in Amsterdam.

After all, it seems like housing wealth will become more relevant as a source of wealth in retirement. This development seems to be necessary too, because the Dutch government tends to promote home ownership instead of pensions. The Netherlands is moving towards an asset-based welfare model, whereby eventually, the increasing importance of home ownership can lead to a shift to neo-liberalism. A qualitative study and examining other factors relating to home ownership could be a suggestion for further research, in order to contribute to the ongoing political debates surrounding housing policies and to the public debate about an ageing population and the role of housing.

5

Samenvatting

Bezuinigingen door de Nederlandse overheid op verschillende kosten, zoals kosten voor sociale voorzieningen, betekenen dat er meer verantwoordelijkheid voor de Nederlandse burger is om bijvoorbeeld zijn of haar eigen pensioen te financieren. Een manier om deze kosten in de toekomst te kunnen financieren is door gebruik te maken van de housing equity: het eigen vermogen in het huis dat opgebouwd is door hypotheekaflossingen en eventuele waardestijging. Vanwege de stijgende huizenprijzen in Amsterdam kan het voor eigenwoningbezitters in Amsterdam handig zijn om hier gebruik van te maken.

Het doel van dit onderzoek is om er achter te komen in hoeverre eigenwoningbezitters in Amsterdam hun woning beschouwen als een financiële investering die zij op latere leeftijd kunnen gebruiken om te betalen voor sociale zorg, gezondheidszorg of voor het pensioen. Daarnaast is het doel van dit

onderzoek om er achter te komen wat de motivaties voor mensen waren om een woning in Amsterdam te kopen, of het potentiële financiële voordeel van eigenwoningbezit een rol heeft gespeeld bij de keuze en of dit gerelateerd kan worden aan de (verwachte) huizenprijsstijgingen in Amsterdam. De onderzoeksvraag is als volgt: In hoeverre beschouwen eigenwoningbezitters in

Amsterdam hun woning als een financiële bron voor niet-woonuitgaven op latere leeftijd?

Om in staat te zijn om deze vraag te kunnen beantwoorden is er gebruik gemaakt van enquêtes en gestructureerde interviews. The vragen gaan over de motivaties om eigenwoningbezitter te worden in Amsterdam en over het gebruik van het eigen vermogen in het huis. Onafhankelijk zijn van een verhuurder en het gevoel van controle over het eigen huis hebben blijken de primaire motivaties voor mensen te zijn om eigenwoningbezitter te worden in Amsterdam. Voor ongeveer 75 procent van de mensen is de mogelijkheid om de woning als investering voor later te gebruiken een motivatie voor eigenwoningbezit. Men beschouwt de woning het vaakst als een financiële bron om het pensioen mee te kunnen financieren: de woning als een inkomen in natura. Er is geen relatie tussen deze motivaties en de stijgende huizenprijzen in Amsterdam.

Ten slotte lijkt het er op dat huisvesting een steeds belangrijkere bron van welvaart wordt tijdens het pensioen. Deze ontwikkeling lijkt ook nodig, aangezien de Nederlandse overheid neigt naar het promoten en ondersteunen van eigenwoningbezit in plaats van pensioenen. Nederland gaat langzamerhand naar een op activa (bezit) gebaseerd welvaartsmodel toe, waarbij uiteindelijk het toenemende belang van eigenwoningbezit kan leiden tot een verschuiving naar neoliberalisme. Een kwalitatief onderzoek en het onderzoeken van andere factoren die gerelateerd zijn aan

eigenwoningbezit kunnen een suggestie zijn voor verder onderzoek, om bij te dragen aan het huidige debat over woonbeleid en aan het publieke debat over een vergrijzende samenleving en de rol van huisvesting.

6

Table of contents

Chapter 1

Introduction and key problem

8

1.1 Introduction 8 1.2 Key problem 9 1.3 Research goal 9 1.4 Social relevance 9 1.5 Scientific relevance 9 1.6 Reading guide 9

Chapter 2

Theoretical framework

10

2.1 Discourses of home ownership 10

2.2 Kemeny’s thesis 11

2.3 The really big trade-off 11

2.4 Housing equity 12

2.4.1 Mortgage Equity Withdrawal (MEW) 12

2.4.2 Releasing housing equity 13

2.5 Pensions under pressure 14

Chapter 3

Research design

15

3.1 Research question and sub-questions 15

3.2 Conceptual model 15 3.3 Research design 16 3.3.1 Quantitative research

3.5.1 Concept: motivations for home ownership 18

3.5.2 Concept: housing equity 18

3.5.3 Concept: non-housing expenditures 18

Chapter 4

The Amsterdam housing market

19

4.1 From renting to home ownership 19

4.2 Rising house prices 20

4.3 Property investment 20

4.4 Towards an overheated housing market 21

Chapter 5

Results

22

5.1 Respondents 22

5.2 Key motivations for home ownership 23

5.3 Financial benefits of home ownership (in Amsterdam) 24

5.4 The home as a financial resource for (non-housing) expenditures 24

Chapter 6

Conclusion

26

Chapter 7

Discussion

27

7.1 Non-financial motivations for home ownership in Amsterdam 27

7.2 Financial motivations for home ownership in Amsterdam 27

7

List of sources

29

Appendix

33

F Statements categorized by age groups 39

G Statements categorized by the year of purchase 42

H Statements categorized by the price of the purchased property 45

I Interview with Mr. Lute 48

8

Chapter 1

Introduction and key problem

1.1.

Introduction

According to the most recent press release by the NVM, the largest Dutch association of brokers and valuers in real estate, Amsterdam housing prices in 2016 have increased by almost 23 percent compared to 2015 (NVM, 2017a). As the demand for housing in Amsterdam has grown, housing prices have risen to unprecedented heights (Damen, 2016a). Until the housing market crashed after the credit crunch in 2008 (Osborne, 2016), the number of homeowners in the United Kingdom was increasing for decades. This trend is also visible in the Netherlands. More and more, people choose to buy a house, instead of renting. It is possible that there is so much demand for housing in Amsterdam because of employment or the attractiveness of the city, but the increased demand may also be attributable to other factors. In the Netherlands, the ‘participatiesamenleving’ (participation by society) has historically been supported by the government. Retrenchments of the Dutch welfare state pertains to various costs, like costs for social welfare provisions, which means there is more responsibility for the Dutch citizens to self-fund, for example, their pensions (Toussaint & Elsinga, 2010). One way to finance these costs in the future is using the house to compensate these costs (releasing housing equity), for example by downsizing, by selling the house and buying a cheaper one, by

overmortgaging or remortgaging, etc. Especially because of the high property values, it could be useful for homeowners in Amsterdam. But, do they use their housing equity and do they see their home as a financial investment to finance costs in later life?

9

1.2.

Key problem

One can decide to buy a house in Amsterdam because of, for example, the attractiveness of the city, but also because one considers it as a financial investment at later age. Due to the rising housing prices, the value of the properties is increasing, so the investment may eventually pay off.

Retrenchments of the Dutch welfare state pertains to various costs, like costs for social welfare provisions, which means there is more responsibility for the Dutch citizens to self-fund, for example, their pensions (Toussaint & Elsinga, 2010). Housing wealth seems to become more important in today’s society, but the question is whether homeowners have chosen to buy a house in Amsterdam in order to generate housing wealth and to use it for financing social welfare provisions during retirement. What were the key motivations for buying a home in Amsterdam and was this decision influenced by the rising housing prices? Do homeowners in Amsterdam see homeownership as a way to finance expenditures at a later age?

The research question in this thesis is as follows:

“

1.3.

Research goal

The goal of this thesis is to find out to what extent homeowners in Amsterdam consider their home as a financial investment which they can use at later age to, for example, pay for social care, health care or pension costs. In addition, the goal is to find out what key motivations people had to buy a home in Amsterdam, if the potential financial benefit of home ownership played a role in the decision and whether this can be related to the (expected) rising housing prices in Amsterdam.

1.4.

Social relevance

It is important to explore to what extent the financial aspects of home ownership play a role when one considers to buy a house in Amsterdam. Is Amsterdam going to be a city where people buy houses because of the economic benefits, or are social benefits of home ownership the main interest for homeowners in Amsterdam? This research is also relevant, because it contributes to ongoing political debates surrounding housing policies. What are the consequences of a neo-liberal policy (privatization of welfare provisions, promoting home ownership) for the importance of home ownership and the attendant benefits? Additionally, the analysis of the data is likely to contribute to the public debate about an ageing population and the role of housing.

1.5.

Scientific relevance

This research contributes to the scientific debate about the discourses of home ownership (Ronald, 2008), especially the discourse in which housing is seen as a financial investment or source of income (Forrest & Hirayama, 2015), and the reasons for this. The research about home ownership is

especially relevant for Amsterdam, because it is a city of predominantly social housing (Boterman & Van Gent, 2014). In addition, the research is relevant because it indicates if Kemeny’s thesis (1981) is also applicable to the case of Amsterdam. It also contributes to an understanding of the relation between privatization of welfare provisions and home ownership (Ronald & Elsinga, 2012).

1.6.

Reading guide

The thesis will start with a theoretical framework in chapter 2. The discourses of home ownership, Kemeny’s thesis and the link between these and other theories will be discussed. Thereafter, in chapter 3, the methodology of the research will be described, including the research question, the sub-questions, the research design and the research methods. Chapter 4 will provide background

information about the Amsterdam housing market and the results of the fieldwork will be revealed in the fifth chapter, followed by the conclusion and discussion. The thesis ends with a list of resources and an appendix.

10

Chapter 2

Theoretical framework

2.1.

Discourses of home ownership

Home ownership can have a different meaning for everyone. For example, owning a home can be seen as a way to show others how successful he or she is, while for others, it can be seen as having a safe and secure place to raise the children. To organize all these different meanings of owning a home, Ronald (2008) assigns the meanings of home ownership into four different discourses. In his book “The ideology of home ownership: homeowner societies and the role of housing”, all these four discourses are discussed. These discourses will later form the basis of the conceptualisation and design of this research.

As already mentioned in the example above, some people consider a home as an asset to show others they are successful. They consider it as a sign of excellence and see home ownership as an expression of social class (Ronald, 2008) and a feeling of personal identity (Elsinga & Hoekstra, 2005). Owning a home can give a feeling of confidence. In the choice for buying a home, self-esteem can play an important role, which is determined by how a person believes others see him (Rohe et al., 2001). Because homeowners are usually accorded to a higher social status, buying a home is a way to promote self-esteem (Elsinga & Hoekstra, 2005), to provide a feeling of self-confidence and to show others how successful they are. In this meaning of home ownership, a home can be seen as a symbol of achievement (Mayer, 1973). Buying a home can feel like achieving the ultimate goal in terms of housing, also because the quality of owner-occupied housing is on average better than that of rental accommodation (Mulder & Wagner, 1998).

Homeowners can not feel only confident about owning a home because of the expression of social class, it is also possible that this feeling is the result of the fact that home ownership is about controlling your own life (Ronald, 2008). Seeing home ownership as a symbol of achievement could also be the result of the feeling of autonomy and security (Elsinga & Hoekstra, 2005). Homeowners are not dependent on a landlord (Mulder & Wagner, 1998), but they are free to make their own decisions about the home. In this discourse of home ownership, independency is an important factor. Homeowners feel confident because they have the control over their own property (Elsinga &

Hoekstra, 2004) and over their own housing situation (Mulder & Wagner, 1998).

For others, owning a home is also about leaving an impression. For these homeowners, owning a home is not so much about impressing others to show their success or to express their social class, but it is more about showing others they feel responsible for their family and friends and that they take care for them (Elsinga & Hoekstra, 2004). For these homeowners, the meaning of home ownership has much more to do with home ownership as a sign of good citizenship and adulthood (Ronald, 2008. In: Van Gent, 2010). They do not only consider home ownership as a responsibility towards family and friends, but for them, it is also about involvement (Elsinga & Hoekstra, 2005). They feel responsible for their neighbours, the maintenance of the neighbourhood and their own house (Elsinga & Hoekstra, 2004).

Besides seeing home ownership as an expression of social class, as controlling your own life or as a responsibility towards friends and family, homeowners can also think about home ownership as possessing a good with economic benefits. The appreciation of the property and the development of personal equity through gradual repayment of the mortgage loan are regarded as a financial benefit (Elsinga & Hoekstra, 2005). For these people, a home is a basic form of security (Saunders, 1990) what is seen by them as a financial asset, an investment which will give homeowners access to unmortgaged housing equity (Ronald, 2008). A purchased home can be considered as an investment which generally keeps its value and can be transferred between generations (Mulder & Wagner, 1998), or in other words: a mechanism for familial accumulation (Saunders, 1990). Home ownership serves to create wealth through appreciation and decreasing mortgage liabilities (Elsinga & Hoekstra, 2005).

11

2.2.

Kemeny’s thesis

The thesis of Kemeny implies that there is a relation between the ideology of homeownership and welfare spending. Neo-liberal governments emphasize the importance of home ownership. As mentioned before, there are different discourses of home ownership. One of the discourses is to see housing as a financial resource to generate housing wealth. It can be used to pay for non-housing expenditures at later age by releasing housing equity. In other words, “people can use the

unmortgaged housing equity as a financial buffer at later age” (Van Gent, 2010: 736) Non-housing

expenditures can be expenditures for a pension, social or health care. For young people, the costs of saving for a deposit and mortgage repayments are proportionately high relative to income (Ronald & Elsinga, 2012). Despite these costs, it can be possible that a young household decide to buy a house, because they are aware of the importance of owning a home in the society. Because of their relatively low income, paying off the mortgage is a heavy burden for the new homeowners, so they will resist extensive welfare provision (Lennartz, 2011), because this requires extra taxation (Van Gent, 2010). Privatisation of the welfare provision is supported by these people, because it leads to lower taxes (Van Gent, 2010). The privatisation of the pensions, social and health care has consequences for the costs of these welfare provisions. Without the support of the state, the costs of these non-housing expenditures will increase. In order to be financially able to afford this, people need a source of wealth (Van Gent, 2010), which means home ownership is not just an ideology, but also an economic factor. This brings us back to the moment one decides to buy a house, which explains the growing demand for owner-occupied housing. Becoming a homeowner, supporting welfare privatisation to lower taxes, privatisation of these welfare provisions and using the home as a source of income, explains the importance of home ownership for neo-liberal parties. Because it is a vicious circle, the number of homeowners will increase and so the number of people who support the privatisation of welfare provisions will grow too. The political parties who are in favour of privatization are often right-wing parties. So, eventually, it could be possible that these right-wing parties will get more votes during the election, because they disproportionately represent home owners (Ansell, 2014). If this would happen, then the political power of the parties on the right side of the political spectrum would grow, which could possibly support a shift to neo-liberalism.

2.3.

The really big trade-off

As already explained in the previous section, it has been argued that there is a relation between home ownership and privatization of welfare provisions. The more people decide to buy a house and to become a homeowner, the more people will support the privatization of welfare provisions. This suggests that people’s housing situation is fundamental to welfare state support (Aalbers & Christophers, 2014). In other words, by becoming a homeowner, people indirectly support the neoliberal ideology of housing. As already came up in Kemeny’s thesis, according to the neoliberal ideology of housing, pensions can be lower if home ownership is high (Delfani et al., 2014).

Empirical research has suggested that countries that have developed high home ownership sectors, have experienced relatively low rates of state spending on older people too (Aalbers & Christophers, 2014). This is what Castles (1998) has called “the really big trade-off”. It is a trade-off between pensions and home ownership (Delfani et al., 2014).

12

2.4.

Housing equity

For homeowners, housing equity is a source of wealth that is locked up in their home. It underpins the conception of home ownership as an investment good and a consumption good. According to Searle (2012: 87), “housing equity is the value of a residential property minus all (mortgage)loans on the

same property”. For many households, housing equity is the largest component of the balance sheet

and this equity is also more evenly dispersed across households than other assets (Benito, 2007). For homeowners, it is possible to convert their housing equity into cash money, so they are able to spent or to invest it (Munro, 2012). Making the choice between withdrawing or retaining the housing equity is likely to be a very important decision for homeowners (Benito, 2007).

Equity extracted from home ownership can be used for several expenditures, not only to buy a home. It can be used for funding a range of other expenditures (Searle, et al., 2009), such as personal expenditures, like the ending of a relationship, having children or unemployment (Delfani et al., 2014). In this research, expenditures like these are called ‘non-housing expenditures’ (appendix, A). When the housing equity is used for these non-housing expenditures, one speaks of equity leakage. This can be seen as the part of secured borrowing which is not reinvested in housing expenditures (Smith & Searle, 2008).

2.4.1. Mortgage Equity Withdrawal (MEW)

A mortgage is a loan which is secured against a residential property (Searle, 2012). It means that the household pays off a loan in earlier life in order to live mortgage-free later on (Delfani et al., 2014). Mortgage equity withdrawal is a transaction whereby a homeowner reduces the equity in their homes (Searle, 2012).

One influence on the decision to withdraw the equity in the home is when housing prices are rising. The income in cash embedded in a home is based on its market or capital value (Doling &

Horsewoord, 2010), which means that rising housing prices, or in other words an increase in the market value of the home, means an increase in the income embedded in the home. So, house price inflation means an increase in the amount of housing equity, raising the likelihood of withdrawing equity (Benito, 2007).

Another influence on the decision to withdraw housing equity is a reduction of the interest rate. This is favourable for people who are thinking of remortgaging as a way to extract their home equity (Benito. 2007): paying off the existing debt and taking out a new higher mortgage (Benito, 2009).

In the following circumstances, derived from the article “Housing equity as a buffer: evidence from UK households” (Benito, 2007), a homeowner is more likely to withdraw equity from their home:

- Younger households or those with rising income profiles who wish to bring forward consumption (Benito, 2007: 9)

- Households that have experienced an adverse financial shock (Benito, 2007: 9)

- If they have a high level of equity in the home (Benito, 2007: 9)

13

Housing equity can be released by selling the house and buying a cheaper house (Doling & Ronald, 2010; Doling & Horsewood, 2011; Munro, 2012). By doing this, the extra funds are released, instead of investing them back into the new property (Searle, 2012). Another option is ‘overmortgaging’, which implies selling the house, buying a new one and “increasing the mortgage by more than is needed to

cover the difference in value of the traded properties” (Searle, 2012: 87). Hereby, you use a part of the

revenues as cash and the rest of the money is used for the mortgage of the new home (Munro, 2012). Instead of selling the home and buying a new (cheaper) home, it is also possible to sell the property and to move into rental accommodation (Munro, 2012), thereby releasing funds from the house sale (Searle, 2012). When homeowners die, or move to nursing homes, the left house can be used as an asset by, for example, the heirs.

By releasing equity in these ways, homeowners move out of their house. But releasing housing equity and remaining in the home is also possible, for instance, by changing from occupier to a renter (Doling & Horsewood, 2011). Instead of selling a home and renting a new home, people ‘sell’ their home to a bank or to another financial or housing institution, but the people remain in the home. This is called ‘sale and lease back’, or in Dutch: het verzilveren van de woning of overwaarde (Thuisborg, 2015). Other possibilities to release equity, but to remain in the home are a reverse mortgage, an equity release loan to achieve a cash income (Doling & Ronald, 2010), or taking out another loan which is higher than their debt at that moment, called ‘remortgaging’ (Searle, 2012).

14

2.5.

Pensions under pressure

Pensions, both public and private, form the main source of retirement income for the Dutch. De Bresser & Knoef (2015) and Haverland (2001) have done research about the Dutch pension system and came to a system which contains of several pillars. Probably the most well-known for many people is the public pension, in Dutch called ‘Algemene OuderdomsWet’ (General Old Age Pensions). This pension is financed by a pay-as-you-go scheme and consists of flat-rate benefits to all residents from age 65 on (Haverland, 2001). The aim of this pension is to provide retirees with a subsistence income during retirement (De Bresser & Knoef, 2015). The amount residents from age 65 on receive depends of personal income (Haverland, 2001), the number of years that a person has worked and on his or her statute. The other public pension which belongs to this first pillar is the, in Dutch called, ‘Algemene Nabestaanden Wet (Surviving Dependents Act), which means that when one’s partner dies, the surviving partner is financially supported. In addition the these two basic pensions, 90 percent of Dutch workers are covered by occupational pensions (Bovenberg & Meijdam, 2001), which belong to the second pillar of the system. Simple worded, this pension consists of an agreement between employer and employee about the contribution to the pension, also called ‘aanvullend pensioen’ (supplementary pension). In contrast to the previous pensions, the pensions belonging to the third pillar are not organized by the state or the employer, but by the employee. Savings accounts, personal investments, life insurances and annuity insurances are examples of these pensions. For this research, the most important way of saving belongs to the fourth pillar of the Dutch pension system. Real estates, shares and interests, properties and (renting out) apartments or dwellings can all be seen as assets to generate income during retirement. An increasing market value is of importance, explained in sections 2.4 and 2.4.1.

Meanwhile, the growth of the relative size of the older generation has undermined the affordability of previously mentioned future state pensions and has put the pension system in the Netherlands under severe pressure. The pressure on the Dutch pension system is expected to reach a peak in 2030 (Toussaint & Elsinga, 2011). Due to the ageing of the population, together with the economic crisis, the Dutch government has generally been cutting their expenses. The affordability of public pensions (pillar 1 and 2) is particularly under pressure (Toussaint & Elsinga, 2011). National social benefits or pension incomes have become less generous, shifting responsibility for maintaining and adequate standard of living during retirement to the individual (De Bresser & Knoef, 2015), or in other words: a shift in responsibility from governments to individual households (Toussaint, 2011). Young households perceive the need to take private measures for their future financial wellbeing (Kemeny, 2005).

Because these young households must be self-sufficient, becoming a homeowner could be one way of attaining future financial wellbeing. Housing equity could be a financial safety net (Groves at al., 2007; Kemeny, 2005), to render themselves less vulnerable to future policy changes. In future, housing wealth seems to become more relevant as a source of wealth in retirement (pillar 4), which means that the Netherlands is moving towards an asset-based welfare model. Although it is quite different to other societies, where this model has been advanced, the Dutch government has tried to promote home ownership (explicitly) and an asset-based welfare model (implicitly) too. These policy changes and the shift in responsibility from governments to individual households raises the question: how do these households think about this, how important is housing wealth for them (already) and to what extent do they consider their home as an asset to generate income during retirement?

15

Chapter 3

Research design

3.1.

Research question and sub-questions

To refer to section 1.3, this research is about the relation between a home as a financial resource and non-housing expenditures at a later age. Based on previous studies (chapter 2) and on the overview of the developments on the Amsterdam housing market (chapter 4), the following main question originated:

“

Based on the key problem and the research question, sub-questions are formulated which will be answered during in the research. The sub-questions are:

1. What are the key motivations among homeowners for buying a home in Amsterdam? 2. How do financial motivations contrast, compliment or compete with non-financial motivations

for buying a home in Amsterdam?

3. Among financial motivations, how does building an asset as a welfare base for non-housing expenditures compare to other motivations?

3.2.

Conceptual model

As one can read in section 2.1, the phenomenon ‘home ownership’ is composed of four different discourses. The discourses are, as already explained, the basis for the motivations for home ownership. Since this research is mainly focused on the role of financial motivations for home ownership, the motivations for home ownership are divided into two categories: financial motivations and non-financial motivations (figure 1). Building up and releasing housing equity, and using the house as a collateral for a loan are financial motivations for home ownership. The social status of home ownership, autonomy and control, and responsible citizenship and family life can be considered as non-financial motivations for home ownership. In addition to these motivations, homeowners will have motivations for Amsterdam as the location for their purchased home. These three categories of motivations can be summarized as: homeowners’ motivations for buying a home in Amsterdam. By examining the differences in motivations people had to buy a house in Amsterdam, it is the goal to find out to what extent homeowners consider their home as a financial resource for non-housing

expenditures at a later age.

Figure 1 Conceptual model. Source: author.

16

3.3.

Research design

3.3.1. Quantitative research

According to Bryman (2012: 35), “quantitative research can be construed as a research strategy that

emphasizes quantification in the collection and analysis of data …”, a quote that properly reflects what

type of research this is. This thesis is a quantitative research and entails a deductive approach (and on a certain point an inductive approach), also due to the fact that the research is arisen from Kemeny’s thesis. To refer to the quote above, the corresponding research strategy (design) in this thesis is exemplified in the next section (3.3.2). The data, coming from the surveys and interviews “must be prepared so that it can be quantified” (Bryman, 2012: 162) and will be analysed, where after the

findings will be fed back to Kemeny’s thesis. 3.3.2. Cross-sectional design

This research will be quantitative to examine to what extent homeowners in Amsterdam consider their home as a financial resource for non-housing expenditures at a later age and it will have a cross-sectional design.

An element of cross-sectional research is that the data is collected at (almost) the same time. When a survey is used, it usually means that the survey will be distributed at the same time (the same day or the same week, for instance), in the interests of validity and reliability. This also means that “the

answers of the survey are supplied at essentially the same time” (Bryman, 2012: 59). In this thesis,

multiple homeowners will be questioned about their motivations for buying a home in Amsterdam. The survey will go online at the beginning of November 2016.

Another element of cross-sectional research is obtaining quantitative data. Because this research is about the motivations of homeowners for buying a home in Amsterdam, and the possible differences between these motivations, a standardized and systematic survey was applied as a method to measure (the differences between) these motivations. By choosing a cross-sectional research,

normally, it is not possible to point out if the identified relationship between seeing a house as an asset and non-housing expenditures at a later age is a causal relationship. According to Bryman (2012: 59), it is only possible to examine the strength (positive or negative) of relationships between these two variables. But, in contrast to the usual cross-sectional research, the data will not only consist of a survey, but will also be supplemented by a couple of interviews. By doing interviews, it can be explained better why homeowners have made certain choices. Interviews will enhance the validity of the claims made about the data. After all, the research will have a cross-sectional research design, but by doing structured interviews, there is also qualitative data available.

17

Deduction and induction are two different approaches for doing research. The process of deduction starts with a theory and an hypothesis. After the data collection and the analysis, it is about confirming or rejecting the hypothesis, followed by a revision of the theory (Bryman, 2012: 24). Contrary to the deductive approach, “the process of induction involves drawing generalizable inferences out of

observations” (Bryman, 2012: 26). Instead of testing a theory, in this approach, the theory is the

outcome of the research. However, the two approaches are interwoven with each other. “… deduction

entails an element of induction, the inductive process is likely to entail a modicum of deduction”

(Bryman, 2012: 26). This research entails both approaches. Kemeny’s thesis is the starting point of this research, which is explained in section 2.2. Normally, one would deduce a hypothesis or hypotheses based on this theory, but in this case, a hypothesis is replaced by a research question. After this, the process of deduction continues by translating the research question into operational terms (Bryman, 2012: 24). In section 3.5, the concepts that make up the research question and sub-questions are “translated into researchable entities” (Bryman, 2012: 24). The process of deduction

continues by the collection of the data.

According to the deductive approach, the findings arising from the data are decisive for confirming or rejecting the hypothesis (research question). On this point, the research has both a deductive and inductive approach. The findings and the interpretations of the findings are not used for generating a whole new theory (induction), neither for confirming or rejecting a hypothesis (deduction). The approach of this research is somewhere in between. On the one hand, this final step entails a deductive approach, by using the findings to complement to Kemeny’s thesis. On the other hand, it entails a inductive approach, by developing a new theory about the relationship between considering a home as a financial resource and non-housing expenditures at a later age.

3.4.

Research method

In this research, there has been made use of a combination of research methods: surveys and

structured-interviews. The choice for these research instruments is based on Bryman’s suggestion that (2012: 162): “In cross-sectional research using social survey research instruments, it will involve

interviewing the sample members by structured interview schedule or distributing a self-completion questionnaire”.

The most important research method will be the survey (self-completion questionnaire). A sample of 100 homeowners in Amsterdam will be questioned about a home as a financial resource for non-housing expenditures at later age. Nobody will be denied from participation on the basis of age, the year of purchase or the price of the purchased property, because these are the variables which will be used in the analysis. The unit of analysis will be the city of Amsterdam.

The survey contains Likert-scale questions, multiple-choice questions and open questions. Moreover, two owners of a home in Amsterdam will be interviewed, in order to get an idea of the reasons behind the motivations they had for buying a home in Amsterdam. The other methods that will be used are existing literature, which was reflected in chapter 2 and statistical data, which is achieved through an analysis of secondary data.

18

3.5.

Operationalization

3.5.1 Concept: motivations for home ownership

To refer to the previous sections, the sub-questions and most of the questions in the survey are about the motivations for home ownership. These motivations are explained in section 2.1 and can be divided into two categories: financial motivations and non-financial motivations.

Rising house prices, the accumulation of wealth, an investment to generate housing wealth, building up and releasing housing equity and using the house as a collateral for a loan are examples of financial motivations for home ownership in this research. The social status of home ownership, autonomy and control, and responsible citizenship and family life can be considered as non-financial motivations for home ownership. In addition, homeowners will have motivations for Amsterdam as the location for their purchased home. Together, these three categories of motivations can be summarized as: homeowners’ motivations for buying a home in Amsterdam.

3.5.2 Concept: housing equity

After mentioning the term housing equity in the previous section(s), it is important to understand the meaning of housing equity. “Housing equity is the value of a residential property minus all

(mortgage)loans on the same property”, according to Searle (2012: 87). Mostly, people purchase a

home by taking out a mortgage. In the Netherlands, a homeowner has 30 years to pay off the mortgage. During these 30 years, the homeowner builds up housing equity, or in other words: the homeowner builds up his or her interest in the property (The balance, 2016a). After 30 years, when the homeowner has paid off the mortgage, he or she is actually the owner of the property.

The housing equity can be converted into cash money, so homeowners are able to spend or to invest it (Munro, 2012). The concept of releasing housing equity will be divided into two categories, because housing equity can be released by leaving the home or by remaining in the home.

Releasing housing equity and remaining in the home can be done by a second mortgage. This is a loan that uses your house as a collateral, but it is called a ‘second’ mortgage, because the ‘first’ loan is the loan used for buying the property (The balance, 2016b). Another form of a second mortgage is a Housing Equity Line of Credit (HELOC). In this way, one has the option to borrow money using a line of credit (The balance, 2016b). It consists of a draw period and a repayment period and is comparable to a credit card account (Nationwide, 2016). Other options are remortgaging: taking out a new

mortgage to get a better interest rate and for more flexibility or to consolidate debt (The Money Advice Service, n.d.), a reverse mortgage: taking out a new mortgage and receiving a capital sum (Toussaint et al., 2011) whereby the interest payable on this loan is added to the mortgage, or a revolving credit with low interest rates called ‘huisvoordeelkrediet’ (Rabobank, n.d.): the homeowner can withdraw money as often as he or she wants, but there is a maximum and it includes a fixed monthly fee. It is also possible to sell the house to a bank or a fund, which immediately leases it back. One becomes a renter and pays a monthly rent to the bank or fund. This is called ‘sale and lease back’ (Thuisborg, 2015). Releasing housing equity, but leaving the home, can be done by selling the current house and buying a cheaper house or selling the current house and moving into rental accommodation. Another option is overmortgaging: the homeowner sells the home and buys a new one, whereby the mortgage increases more than is needed to cover de difference between the values of the sold and bought home.

3.5.3 Concept: non-housing expenditures

To continue on this concept, equity extracted from home ownership can be used for several expenditures, which can be divided into two categories: housing expenditures and non-housing expenditures. By housing expenditures, it is about using the housing equity to buy a new home, but in this research, it is about using the housing equity for non-housing expenditures (mentioned in the research question). All other personal expenditures belong to this category (appendix, A), as long as it is not about investing in new property.

19

Chapter 4

The Amsterdam housing market

Before revealing the results of the research, this chapter consists of background information about the Amsterdam housing market. It will not only be about the situation in 2016, but it will cover the

developments on the Amsterdam housing market compared to preceding years too.

4.1

From renting to home ownership

In the Netherlands, renting a home was much more usual for Dutch households than home ownership. In 1956, 29 percent of the dwellings in the Netherlands were owner-occupied (Mulder & Wagner, 1998). Since then, the number of homeowners started to increase. In 1970, the percentage of owner-occupied dwellings was around the 35 percent (Mulder & Wagner, 1998). The increase of

homeowners in the Netherlands after the World War II can be seen as the consequence of two major changes in housing policy: the encouragement of owner-occupancy and the reduction of building programmes in the social sector, which meant severe budget cuts in the social sector and Dutch subsidy programmes for owner-occupied housing (Mulder & Wagner, 1998).

In recent decades, the proportion of owner-occupiers has increased, both in the Netherlands as well as in Amsterdam (figure 2). Between 1990 and 2009, home ownership has increased by 10 to 20 percentage points (Leidelmeijer et al., 2011). According to a study by Leidelmeijer et al. (2011), a company doing research to support the development of policies, the increase in home ownership among younger households should probably be interpreted as a consequence of the increasing accessibility of home ownership. Innovative lending constructions with banks, low interest rates and the supply of dwellings (Leidelmeijer et al., 2011) make it all more attractive for younger households to become a homeowner instead of a renter.

Besides these factors, rising rents and declining house prices in Amsterdam (ING, 2017) have made it for many people more attractive to buy a home in Amsterdam, rather than renting. Although the Amsterdam housing prices have increased since 2013, rental prices in the private sector have risen even more, which makes buying relative to renting a home even more profitable (Van den

Eerenbeemt, 2017).

Figure 2 Number of purchased homes in Amsterdam from 1995 to 2015. Source: CBS & Kadaster, 2016.

0 2000 4000 6000 8000 10000 12000 14000 19 95 19 96 19 97 19 98 19 99 20 00 20 01 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09 20 10 20 11 20 12 20 13 20 14 20 15 Am o u n t Year Purchased homes in Amsterdam

20

4.2

Rising house prices

Not only because of the rising rental prices in the private sector, also a booming economy and thereby people having more money to spend are the cause of the increase in the number of purchased houses. As a consequence, as was mentioned above, at the end of the financial crisis in 2013, housing prices started to rise. Since then, housing prices in the Netherlands have increased by more than 16 percent (NVM, 2016), particularly in Amsterdam. According to the chairman of the NVM, the largest Dutch association of brokers and valuers in real estate, the price of an average sold home in Amsterdam in 2016 has increased by almost 23 percent compared to 2015 and more than 50 percent compared to 2013 (NVM, 2017a). In 2016, people have paid 376,000 euros on average to become a homeowner in Amsterdam, which is a half times so expensive as people pay on average for a home outside Amsterdam (Van den Eerenbeemt, 2017). This is partly due to people paying an average of 3.4 percent above the price to become a homeowner in Amsterdam (NVM, 2016), but also because not enough homes are offered for sale, causing prices to rise relatively fast (NVM, 2017a). Another cause is the growing popularity of the website AirBnB (ING, 2017). Homeowners in Amsterdam can rent out their house to users of the website AirBnB. Because the home in Amsterdam in this way is an easy way to make money, the demand for housing in Amsterdam rises, thereby increasing the market value of the houses.

4.3

Property investment

Because of the increasing demand for housing in the Amsterdam, one in seven people even think housing prices in Amsterdam will never decrease anymore (ING, 2017). But, as a consequence of the rising house prices, houses become more and more interesting for investors and real estate

companies, which have bought nearly 20 percent of the purchased homes in Amsterdam (Van den Eerenbeemt, 2017). These investors can be divided into two groups. On the one hand, there are small investors who buy properties and sell these at a profit or rent these out to generate an income. These investors do not buy the property for personal purposes, but mainly for the financial purposes. On the other hand, there are small investors (individuals) who buy property for themselves, or for example, for their (grand)children who want to study or work in Amsterdam and are looking for accommodation (Van den Eerenbeemt, 2017). As one can see in figure 3, in the first quarter of 2016, both groups of investors together accounted for 16 percent of all purchased homes in Amsterdam, which is more than ever (ING, 2017).

Figure 3 ‘Buy-to-let-transactions’, proportion of total number of transactions by small investors in

Amsterdam according to the approach*. Source: Kadaster, 2016. Creator: ING, 2017.

* Approach of ‘Buy-to-let-transactions’: buyers with 2-9 dwellings, whereby the purchased property does not function as the main residence or as a recreational property.

21

4.4

Towards an overheated housing market

In the fourth quarter of 2016, on average, it took a homeowner only 26 days to sell his or her home (NVM, 2017b), which is extremely short compared to other regions in the Netherlands. Together with the rising house prices and a record number of 12.500 homes sold in Amsterdam in 2015 (NVM, 2017b), these developments and statistics seem to be positive at first sight. However, there are also negative consequences: less homes are offered for sale and the supply of housing declines. As one can see in figure 4, less and less homes are offered for sale (NVM, 2017a) and the prediction is that by 2017 there will be no houses for sale anymore (Damen, 2016b). The negative consequences will lead towards an overheated Amsterdam housing market and the first signs are already there. In the fourth quarter of 2016, the number of transactions in Amsterdam decreased by almost 17 percent compared to the fourth quarter of 2015 (NVM, 2017b). If these developments will continue, it will be problematic for young households. Rising house prices, an insufficient housing supply and less and less homes being offered for sale will make it very difficult for young households to become a homeowner in Amsterdam (NVM, 2017a). But, according to Kemeny’s thesis, home ownership is important, especially for these people, in order to pay for social welfare provisions during retirement. Particularly a home in Amsterdam could be an important financial resource to pay for these social welfare provisions, because of the increasing market value. This raises the question whether this was a motivation for the current homeowners in Amsterdam when they decided to buy a home in

Amsterdam.

Figure 4 Number of homes for sale in Amsterdam since March 2013. Source: CBS, 2016. 0 1000 2000 3000 4000 5000 6000 7000 8000 Ma rch 20 13 Ju n e 2 013 Se p te m b e r 2013 De ce m b er 20 13 Ma rch 20 14 Ju n e 2 01 4 Se p te m b e r 2014 De ce m b er 20 14 Ma rch 20 15 Ju n e 2 015 Se p te m b e r 2015 De ce m b er 20 15 Ma rch 20 16 Ju n e 2 016 Se p te m b e r 2016 Am o u n t Year Homes for sale in Amsterdam

22

Chapter 5

Results

5.1

Respondents

After a few weeks, 100 respondents had filled in the survey. The average age of the respondents is about 45 years old and on average, they have bought their home between 2008 and 2009 for an average price of 347,000 euros. Most people have purchased a house in city district Oost/East (25), followed by Zuid/South (20), West/West (19), Noord/North (17) and the other districts. Out of the 100 respondents, 93 of them live for the most of the time in Amsterdam and in order to be able to buy this, 96 respondents have taken out a mortgage. As one can see in figure 5, the sample is not entirely representative for the city of Amsterdam. In the sample, there are too many respondents who are living in city district Noord/North, Oost/East, Zuid/South and West/West and too little respondents from Centrum/Centre, Nieuw-West/New-West and Zuidoost/Southeast.

Figure 5 The population of Amsterdam and the respondents in the sample arranged by city districts in 2016.

Source: OIS Amsterdam, 2016 & author. Creator: author.

Categorized by age groups, the sample is not entirely representative neither. In the sample, there are proportionally too few people from 20 to 34 years old and from 65 years and older (figure 6). This means that in the sample there are proportionally too many people from 35 to 49 years old and from 50 to 64 years old.

Figure 6 The population of Amsterdam and the respondents in the sample categorized by age groups in 2016.

Source: OIS Amsterdam, 2016 & author. Creator: author.

0% 20% 40% 60% 80% 100% Amsterdam Sample Percentage Centrum Westpoort West Nieuw-West Zuid Oost Noord Zuidoost 0% 20% 40% 60% 80% 100% Amsterdam Sample Percentage 20-34 35-49 50-64 65+

23

5.2

Key motivations for home ownership in Amsterdam

Based on all data coming from the survey, autonomy and control is clearly the most important motivation for home ownership. According to figure 7, being independent of a landlord is the most frequently mentioned motivation for home ownership instead of renting (statement 9). Especially for people who have bought their home during the financial crisis (2008-2014) and people who have paid over 800,000 euros for their property, this is a motivation for home ownership.

Besides being independent, many people have the motivation to buy a home instead of renting one, because owning a home provides a feeling of security (statement 8). Particularly for young people (20-34) this is one of the motivations for home ownership: 80 percent of them agree with the statement. Moreover, the younger the age group, the higher the percentage of people who indicate that they have bought the home because it provides a feeling of security.

Considering the home as an investment for later life is another important motivation for people to choose for home ownership, according to figure 7 (statement 12). After being independent of a landlord, this is the most frequently mentioned motivation for owning a home. For almost all

respondents this is a motivation to buy a home instead of renting one, except for people 65 years or older. Especially people who have paid more than 800,000 euros for their home consider this as an important motivation for home ownership. Additionally, the later one has bought the house, the higher the percentage of people who have bought a home because they consider it as an investment for later life.

The last important motivation for home ownership, according to the results of the survey, has

something to do with the social status of home ownership. More than half of the respondents choose for a home in Amsterdam, because owning a home in Amsterdam is a way to promote self-esteem (statement 1). This is particularly a motivation for people who have paid over 800,000 euros for their property, for people between 20 and 34 years old and for people who have bought their house in 2015 or 2016. Hereby, the following applies: the later one has bought the property, the higher the

percentage of people who have chosen for a home in Amsterdam because it is a way to promote their self-esteem.

Figure 7 Responses to statements about home ownership in Amsterdam in 2016. Source: author. 0 10 20 30 40 50 60 70 80 90 100 1 2 3 7 8 9 10 11 4 5 6 12 13 Re sp o n d en ts Statements Do not know Strongly disagree Disagree Undecided Agree Strongly agree

Social status Autonomy Responsible Economic advantages & control citizenship & & security

24

5.3

Financial benefits of home ownership (in Amsterdam)

To refer to section 2.4.1, one of the financial benefits of home ownership is the fact that the

homeowner is able to release housing equity. One influence on the decision to withdraw the equity in the home is when housing prices are rising. This means that the market value of the home increases (appreciation), which means that the housing equity increases. As already mentioned in chapter 4, housing prices are rising in Amsterdam. Looking at the results in the previous section, apparently, the majority consider their home as an investment for later life. This raises the question why they have chosen to become a homeowner in Amsterdam and if there is a connection between these rising house prices and the choice to become a homeowner in Amsterdam.

But, looking at the results of statement 4 (figure 7), the answer is clear. Out of the 100 respondents, 60 people indicate they have not chosen to buy a house in Amsterdam, because of the expected rising house prices in Amsterdam. For only 21 percent of the respondents the rising house prices are a motivation to buy a home in Amsterdam. A same sort of question, but formulated in another way, gives the same kind of results: 49 percent of the people did not expect that Amsterdam would be the best location for accumulation of wealth by home ownership, against 31 percent who did.

Apparently, the financial benefits of home ownership are not really important in the decision for people to buy a house in Amsterdam. Still, it is possible that people make use of the financial benefits of home ownership, for instance, by releasing housing equity. As explained in section 2.4.2, there are many different ways to do this. But, according to figure 8, not many people are releasing housing equity. Out of the 105 answers (multiple answers were allowed), 79 times people ticked the box ‘not applicable’. Remortgaging was filled in 9 times, a second mortgage and overmortgaging both 7 times.

Figure 8 The way the 100 respondents (homeowners) have released their housing equity (in percentages) in 2016.

Source: author.

5.4

The home as a financial resource for (non-housing) expenditures

As was demonstrated in the previous section, not many of the 100 respondents are releasing housing equity. Further on in the survey, the respondents were asked about their home as a financial resource for (non-housing) expenditures. To refer back to section 2.4, equity extracted from home ownership can be used for several expenditures, not only to buy a home. Out of the 100 people, 58 people consider their home as a financial resource for pension costs (figure 9). Because of the fact people had the option to choose multiple answers, it is 24 percent of all answers. Besides ‘pension’, people filled in the option ‘investing in property’ (38 times), ‘holiday/foreign travel’ (26 times), durable goods and debt repayment (both filled in 25 times) and home ownership as a financial resource for the repayment of debts (23 times).

7% _3% 7% 8% 75% Second mortgage Huisvoordeelkrediet Overmortgaging Remortgaging Not applicable

25

Source: author.

As reported in section 5.2, 72 percent of the respondents consider their home as an investment for later life. Apart from this question, at the end of the survey, there was a question about to what extent the respondent considers his or her home as an investment for later life, which they had to answer on a scale from 1 (not at all) to 10 (absolutely). On average, the respondents give a 7.14. As one can see in figure 10, most often, one gives an 8 or a 9. Exactly 75 percent of the people who have filled in this survey gave a 7 or higher to what extent they consider their home as an investment for later life.

Figure 10 To what extent do 100 respondents (homeowners) consider their home as an investment for later life in 2016.

Source: author. 16% 10% 1% 11% 24% 10% 10% 8% 4% 6% Investing in property Durable goods Non-durable goods Holiday/foreign travel Pension Debt repayment Health care costs during retirement

Saving for family/friends (transfer between generations Other, namely… Do not know 0 5 10 15 20 25 1 2 3 4 5 6 7 8 9 10 Am o u n t Respondents

26

Chapter 6

Conclusion

In this research, the main question was: to what extent do homeowners in Amsterdam consider their home as a financial resource for non-housing expenditures at a later age?

First of all, the autonomy and control of home ownership is the most mentioned motivation to become a homeowner. Being independent of a landlord and the feeling of security of controlling the own home are motivations for home ownership for most of the respondents. Especially people who have paid over 800,000 euros for their home, people between 20 and 34 years old and people who have bought their property in 2015 or 2016 choose for a home in Amsterdam, because owning a home in

Amsterdam is a way to promote self-esteem. The interviews show us that the attractiveness of the city and the presence and close proximity of amenities can be important factors for home ownership in Amsterdam. According to the respondents of the survey, financial motivations are not the most mentioned motivations for people to become a homeowner in Amsterdam. Most people do not buy a home in Amsterdam because of the rising house prices or because they expect Amsterdam to be the best location for the accumulation of wealth. Another financial motivation for home ownership, the possibility to build up and withdraw housing equity, is neither a motivation for homeowners in Amsterdam: 75 percent of the respondents do not release housing equity.

For most respondents (72%), the last important motivation for home ownership is the home as an investment for later life. For almost all of the respondents (90%), this does not mean they consider their home as an asset to sell at a profit. It is about the home as a financial resource for (non-housing) expenditures at a later age. Most frequently, people consider their home as a resource to finance their pension (24%), investments in the same property (16%), holiday/foreign travel (11%), durable goods (10%), debt repayment (10%) and health care costs during retirement (10%).

After all, on a scale from 1 (not at all) to 10 (absolutely), 75 percent of the people give a 7 or higher to what extent they consider their home as an investment for later life, whereby almost half of the respondents give an 8 or a 9. Thus, to conclude, about three quarters of the people consider their home as a financial resource for non-housing expenditures at a later age.

27

Chapter 7

Discussion

7.1

Non-financial motivations for home ownership in Amsterdam

To refer to section 5.2, four out of the thirteen statements show remarkable results because of the high percentage of people who agree with these statements. One of them is about the social status of home ownership, two are about the autonomy and control of owning a home and only one of them can be considered as a financial motivation, which will be discussed in the following section.

The results revealing autonomy and control as the most mentioned motivations by the respondents, is something which is perhaps not so surprising, because being independent of a landlord and the feeling of security of controlling the own home are perhaps the two major differences between owning a home and renting one. The results show us that these are the most important motivations for almost every respondent, no matter how the results are categorized.

Another reason why people choose to buy a home in Amsterdam, is because owning a home in Amsterdam is a way to promote self-esteem. With Kemeny’s thesis in mind, it can be possible that this motivation for home ownership in Amsterdam has something to do with the importance of owning a home in today’s society. As explained in section 2.2, especially for young people it is important to own a home. Looking at the results of this statement, categorized by age groups (appendix, E), it is indeed the group of younger people who mostly indicate they have bought the home because it is a way to promote their self-esteem. Besides that, the older the respondent, the higher the percentage of people who indicate this was not a motivation to buy the property. The increasing importance of home

ownership in today’s society is also reflected by the results that especially for people who have bought their home in 2015 or 2016, owning a home in Amsterdam is a way to promote self-esteem. Moreover, this becomes more and more a motivation for people the later they have bought the house. This might be caused by the increasing demand for housing in Amsterdam and the thereby rising housing prices, explained in chapter 4. For house hunters, it seems to become harder and harder to find and to get hold of the desired house (section 4.4). When they manage to buy the desired house anyway, it can be that this promotes their self-esteem. In addition to these three motivations for home ownership, the attractiveness of the city and the presence and proximity of amenities, mentioned by the interviewees, can be reasons for people to become a homeowner in Amsterdam.

7.2

Financial motivations for home ownership in Amsterdam

Out of these four motivations, one of them is about the economic advantage and security of home ownership. As explained in section 5.3, there are multiple financial benefits of home ownership, which could have been the reason why people have decided to become a homeowner instead of a renter. Before discussing the results, it is important, however, to distinguish two kinds of housing wealth. On the one hand, a homeowner can use his or her house as an income in kind. After paying off the mortgage, a homeowner has almost no housing costs compared to a renter. Thus, on a same pension, the retired homeowner is better off than the retired renter, because the home is providing a kind of income for the homeowner. The homeowner can live on a smaller pension than the renter, which means the homeowner, compared to the renter, has more money to spend.

On the other hand, a homeowner can consider his or her house purely as an asset, whereby tapping into wealth is the main goal. Usually, the homeowner has no intentions to live in the house, because it is all about the potential to make a profit. The homeowner buys the house and tries to sell it for a higher price. Raising the price of the house is possible by renovating and refurbishing the house, but this may also happen if the market value of the Amsterdam houses increase, because of, for example, a growing interest in homes in Amsterdam. Each of these incomes support retirement in a different way.