Downloads
![Image representing the file: WP202002-House-Price-Rises-and-Borrowing-to-Invest1.pdf](/sites/default/files/output_url_files/WP202002-House-Price-Rises-and-Borrowing-to-Invest1.pdf_0.jpg)
WP202002-House-Price-Rises-and-Borrowing-to-Invest1.pdf
PDF | 761.34 KB
Household borrowing and spending rise with house prices, particularly for leveraged households, but household spending is not consumption. We propose an alternative borrow-to-invest channel by which house price gains affect household spending on residential investment. We show that rational, leveraged households have an incentive to make additional residential investments when house prices rise. Our empirical compares responses in different kinds of spending across more and less leveraged households. We find strong evidence of the borrow-to-invest channel in UK data. Credit constraints matter through reducing access to leveraged returns and so reducing lifetime resources, rather than through consumption smoothing.
Authors
![Hamish Low](/sites/default/files/styles/square_desktop/public/2022-07/Hamish_Low.jpg?itok=SxQtBzSd)
Research Fellow University of Oxford
Hamish is the James Meade Professor of Economics at the University of Oxford, a Professorial Fellow of Nuffield College and a Research Fellow at IFS.
![Thomas Crossley](/sites/default/files/styles/square_desktop/public/2022-07/Tom%20Crossley.jpg?itok=8BNVWAtq)
Research Fellow University of Michigan
Tom is a Research Fellow at IFS, a Research Professor for the Institute for Social Research at the University of Michigan.
![Peter Levell](/sites/default/files/styles/square_desktop/public/2022-06/Peter_Levell.jpg?itok=QouDiSQD)
Associate Director
Peter joined in 2009. He has published several papers on the microeconomics of household spending and labour supply decisions over the life-cycle.
Working Paper details
- DOI
- 10.1920/wp.ifs.2020.220
- Publisher
- The IFS
Suggested citation
T, Crossley and P, Levell and H, Low. (2020). House Price Rises and Borrowing to Invest. London: The IFS. Available at: https://ifs.org.uk/publications/house-price-rises-and-borrowing-invest (accessed: 30 June 2024).
More from IFS
Understand this issue
![English farm with cows](/sites/default/files/styles/square_desktop/public/2024-04/IHT%20comment%20feature.jpg?itok=dHdPz6bF)
Raising revenue from closing inheritance tax loopholes
18 April 2024
![Older couple signing document](/sites/default/files/styles/square_desktop/public/2024-01/older-couple-signing-document-2.jpg?itok=OOQ95aZx)
Why inheritance tax should be reformed
18 January 2024
![Row of terraced houses](/sites/default/files/styles/square_desktop/public/2023-07/Row-of-terraced-houses.jpg?itok=V4XeVn72)
How important is the Bank of Mum and Dad?
15 December 2023
Policy analysis
![Terrace housing](/sites/default/files/styles/square_desktop/public/2024-06/terrace%20housing%20feature.jpg?itok=eloSiGLE)
Making mortgage guarantees permanent will help some first-time buyers, but only if they can afford a bigger mortgage
6 June 2024
![New build homes](/sites/default/files/styles/square_desktop/public/2024-05/new-build-homes.jpg?itok=Cxw9_Y1A)
Homeownership for young adults has recovered to its 2010 level
29 May 2024
![private jet](/sites/default/files/styles/square_desktop/public/2024-03/private%20jet%20feature.jpg?itok=-CzHigdW)
Reforming the taxation of non-doms: policy options and uncertainties
4 March 2024
Academic research
![Working Paper Cover](/sites/default/files/styles/portrait/public/2024-06/WP202425-The-intergenerational-elasticity-of-earnings-exploring-the-mechanisms_Page_01.jpg?itok=BhqlYpqX)
The intergenerational elasticity of earnings: Exploring the mechanisms
3 June 2024
![Working Paper Cover](/sites/default/files/styles/portrait/public/2024-04/WP202412-The-life-cycle-dynamics-of-wealth-mobility_Page_01.jpg?itok=CyJ0guZM)
The life-cycle dynamics of wealth mobility
10 April 2024
![Working paper cover](/sites/default/files/styles/portrait/public/2024-03/WP202409-House-price-rises-and-borrowing-to-invest.jpg?itok=4udJUAU_)
House price rises and borrowing to invest
27 March 2024