A Panel Data Analysis of Housing Tenure Choice Decision of Millennials

This study examines the determinants of housing tenure choice decisions of Millennials. Using KLIPS panel data from 2014 to 2020, a correlated random effects probit model and a fixed effects logit model were estimated to control for endogeneity problem associated with time-invariant unobserved heterogeneity. Estimation results showed that net wealth, relative housing cost, marital status of household heads were major determinants of housing tenure choice decisions. Permanent income, one of key variables on the housing tenure choice, was not significant, indicating that net wealth rather than income is more important to homeownership decisions of Millennials. However, the effect of net wealth on the probability of home owning was estimated to decrease over the observation period because the increase in net wealth could not catch up with the rise of housing price. A sharp decrease of the effect of net wealth on the probability of home owning in recent years was attributable to a dramatic increase in housing price and more stringent mortgage regulations.