The literacy paradox: how financial knowledge discourages while digital skills encourage housing investment in Indonesia

Purpose This paper aims to investigate the “literacy paradox” in housing investment decisions: examining why financial literacy appears to discourage while digital platform literacy encourages housing investment and ownership in Indonesia. The authors measure literacy levels across urban populations and analyze how different literacy domains distinctly shape investment behavior. Design/methodology/approach Using an exam-type questionnaire administered to 401 respondents across 18 major Indonesian cities in Q3 2023, the authors use both Logistic and Probit regression models with marginal effects analysis to examine how specific areas of financial literacy (interest rates, inflation and risk diversification) and digital platform literacy (ease of access, digital skills and digital ethics) independently affect investment intentions, financial planning prioritization, willingness-to-pay (WTP) and homeownership. Findings The results uncover a striking paradox: individuals with higher financial literacy – particularly those understanding inflation and risk diversification – are significantly less likely to invest in housing (marginal effect at the mean [MEM] = −13% to −26%), while those proficient in digital platforms are more inclined toward housing investment (MEM = 11% to 15%). This suggests that financial literacy may function as a protective mechanism against property market speculation, while digital platform competence facilitates market participation. Originality/value This paper provides new insight regarding digital platform literacy and its areas with financial literacy effects on individual WTP for housing expenditure in developing nations. A novel instrument was designed specifically in the context of the use of homeownership loans and access to property listing platforms. Econometric analysis not only models the effects of literacy levels but also components of financial and digital platform literacy. Furthermore, this paper finds that financial literacy in Indonesia’s case might reduce the tendency of residential property assets over-investment, which potentially increases the housing demand and price bubble.