Housing in French Households Portfolio

The dual motives of housing behaviour, consumption and investment, make the analysis of housing purchases quite difficult. Nevertheless, it is better to refer to a model that keeps the two-dimensional aspects of housing. In the absence of institutional considerations, this model predicts that it is the difference between the housing investment demand and the housing consumption demsnd that explains decisions to purchase dwellings for owner occupation and for letting out. We have tested the model on the french data of the survey Actifs Financiers 1992. Results show that the difference between the two demands cannot in itself explain housing purchases. Transaction costs, the tax system, the public aid policies for home ownership, and other market imperfections are inadequately dealt with. Moreover, estimation and identification of housing demand functions, both for consumption and investment, tend to show that there are portfolio motives in the factors that determine housing demand for owner occupation. To go further in our analysis of housing behaviours, and due to the fact that portfolio motives are present when a household buys its main residence, we have tested a portfolio choice model where the different dwellings are defined as assets. The empirical test of this model shows the specificities of real estate in the household wealth. Nonetheless, even though we found some independence between investment in principal residence and in financial assets, it seems difficult to separate the decision of owning of main residence and owning of housing for letting out.