Boligejeren: investoren der ikke kan

Jesper Køppen

Student thesis: Master thesis


This thesis is an assessment of the potential improvements to risk and return the Danish home ownerscould achieve on their portfolios by optimal asset allocation. The Danish households are characterized by avery large exposure toward housing risk due to the overrepresentation of this asset in the portfolio. Furthermore, this housing investment is not diversified as the owner holds a single house, not a portfolio ofhouses, leaving the home owner exposed to idiosyncratic as well as systematic risk. This is coupled with avery high leverage as a result of favourable mortgage conditions leaving the Danish home owners in a very delicate postition in the event dropping house prices

The large position in housing assets in the home owner´s portfolio is due to an inablility to split housing consumption from housing investment as the home owner is forced to invest an amount equal to the fullvalue of the house even though the housing good is consumed over many years. Based on this the potentialgains to the risk/return characteristics of the household portfolio are analyzed assuming the home owner isnot subject to practical constraints on the housing investment. Earlier studies suggest that by holding aportfolio of houses rather than a single home the idiosyncratic risk is eliminated reducing the overall risk onthe housing asset to about half. Using historical returns for the period 1992-2014 for 92 Danishmunicipalities efficient portfolios are estimated and it is found that the amount of housing asset is lowerthan in the current Danish househoulds indicating a suboptimal asset allocation. Based on these observations the thesis proceeds to discuss the proposed theories that might allow such anoptimization of the household portfolio. The theories are discussed in a Danish context including thepossible impact of Danish tax law on the proposals.
Additionally, a new theory is suggested to reduce the home owner´s exposure to idiosyncratic risk inspired by the well established Danish cooperative housing
ownership: Andelsboligen.

EducationsMSc in Auditing, (Graduate Programme) Final Thesis
Publication date2015
Number of pages87