► We assess the determinants of housing booms and busts. ► The recent housing booms have been amongst the longest in the past four decades. ► Liquidity has a significant influence on the probability of booms and busts occurring. ► Deregulation has magnified the impact of the liquidity on the occurrence of booms. This study looks at the characteristics and determinants of booms and busts in housing prices for a sample of eighteen industrialised countries over the period 1980–2007. From an historical perspective, we find that recent housing booms have been amongst the longest in the past four decades. Estimates of a Multinomial Probit model suggest that domestic credit and interest rates have a significant influence on the probability of booms and busts occurring. Moreover, international liquidity plays a significant role for the occurrence of housing booms and—in conjunction with banking crises—for busts. We also find that the deregulation of financial markets has strongly magnified the impact of the domestic financial sector on the occurrence of booms.
The growth of the sharing economy has received increasing attention from economists. Some researchers have examined how these new business models shape market mechanisms and, in the case of home sharing, economists have examined how the sharing economy affects the hotel industry. There is currently limited evidence on whether home sharing affects the housing market, despite the obvious overlap between these two markets. As a result, policy makers grappling with the effects of the rapid growth of home sharing have inadequate information on which to make reasoned policy decisions. In this paper, we add to the small but growing body of knowledge on how the sharing economy is shaping the housing market by focusing on the short-term effects of the growth of Airbnb in Boston neighborhoods on the rental market, relying on individual rental listings. We examine whether the increasing presence of Airbnb raises asking rents and whether the change in rents may be driven by a decline in the supply of housing offered for rent. We show that a one standard deviation increase in Airbnb listings is associated with an increase in asking rents of 0.4%.
► Most studies find significant school quality capitalization especially for educational output. ► Studies with fixed-effects estimations find that house values rise by below 4% for a one-standard deviation increase in student test scores. ► Although major conceptual and estimation challenges remain, much progress has been made on this topic. This paper provides a comprehensive review of empirical studies on the capitalization of school quality into house values that have appeared since 1999. We explore their methodological innovations and capitalization results. Most studies find significant capitalization especially for educational outputs, although the magnitudes are smaller for studies with fixed-effects estimation strategies. These studies find that house values rise by below 4% for a one-standard deviation increase in student test scores. Although major conceptual and estimation challenges remain, much progress has been made on this topic.
As the national mortgage crisis has worsened, an increasing number of communities are facing declining housing prices and high rates of foreclosure. Central to the call for government intervention in this crisis is the claim that foreclosures not only hurt those who are losing their homes to foreclosure, but also harm neighbors by reducing the value of nearby properties and in turn, reducing local governments’ tax bases. The extent to which foreclosures do in fact drive down neighboring property values has become a crucial question for policy-makers. In this paper, we use a unique dataset on property sales and foreclosure filings in New York City from 2000 to 2005 to identify the effects of foreclosure starts on housing prices in the surrounding neighborhood. Regression results suggest that above some threshold, proximity to properties in foreclosure is associated with lower sales prices. The magnitude of the price discount increases with the number of properties in foreclosure, but not in a linear relationship.
Peer to Peer e-commerce is increasingly characterized by trends towards the personalization of buyers and sellers in the on-line marketplace. This personalization includes buyer reviews, personal pictures and profiles, and other biographical information intended to reduce buyers’ perceived “purchase risk” or to facilitate trust in the sellers. However, this phenomenon is transforming what started as an essentially “anonymous” market to one susceptible to traditional market failures, including potential racial discrimination, in a manner similar to its brick and mortar counterparts. In this paper, we examine the effect of on-line host information (race, gender, sexual orientation, etc.) on the price of available rental listings in San Francisco on Airbnb.com. We find that on average, Asian and Hispanic hosts charge 8%-10% lower prices relative to their White counterparts on equivalent rental properties, after controlling for all renter-available information on rental unit characteristics, as well as additional information on neighborhood property values, area demographics, and occupancy rates. We do not find any differences in occupancy rates between minority and White hosts. This may suggest that minorities price lower because they are forward-looking, perhaps due to an expectation of discrimination in the online marketplace or have a preference to increase demand to either maintain their target occupancy level or to attract a larger pool of potential renters to choose from. Overall, our findings are consistent with but not conclusive of a market test of potential racial discrimination affecting Hispanic Airbnb hosts, manifested in an anticipation of disparate market demand for their rentals, and responded to by lower listing prices.
The recent global financial crisis has highlighted the potential conflict between improving access to housing finance and maintaining financial stability. Using a new dataset on housing finance and house prices for a sample of more than 50 countries, this paper analyzes the dynamic relationship between household credit and house-price booms. It also examines the potential role of some housing finance characteristics on the likelihood of house-price booms and on how they ended. The following stylized patterns are highlighted. First, credit and house-price booms are tightly linked. Second, house-price booms have occurred more often with a twin credit boom (simultaneous booms in both household and firm credit) than with a solo boom in household credit. Third, house-price booms seem to be more likely in countries with higher loan to value ratios and mortgage funding models based on securitization or wholesale sources. Finally, we find that the majority of house-price booms end up with a recession, and that both twin credit booms and non-retail deposit funding predict a worse landing.
With prices soaring in Chinese superstar cities (i.e., Beijing, Shanghai, Guangzhou and Shenzhen), housing is becoming increasingly unaffordable. This paper investigates whether housing unaffordability crowds out elites in Chinese superstar cities. Using both micro- and macro-level data from China's Urban Household Survey and China Statistical Yearbook for Regional Economy, we find that, in general, elites still prefer superstar cities. However, there is evidence that the attractiveness of superstar cities has declined over time. In addition, we find that the next-tier cities (i.e., alternative cities) become increasingly attractive to elites. These findings provide strong evidence of the crowding out effect on elites in Chinese superstar cities due to their housing unaffordability.
► We incorporate quantile regression into spatial econometric modeling. ► We collect housing transactions’ microdata, which are rare in China. ► Spatial dependence of house prices is U-shaped across the response distribution. ► Housing attributes’ implicit prices vary greatly across the response distribution. Despite its long history, hedonic pricing for housing valuation remains an active research area, and applications of new estimation methods continually push research frontiers. However, housing studies regarding Chinese cities are limited because of the short history of China’s free housing market. Such studies may, nonetheless, provide new insights given the nation’s current transitional stage of economic development. Therefore, this research makes use of publicly accessible sources to construct a new micro-dataset for an emerging Chinese city, Changsha, and it incorporates quantile regression with spatial econometric modeling to examine how implicit prices of housing characteristics may vary across the conditional distribution of house prices. Substantial variations are found, and the intuitions and implications are discussed. Additionally, the spatial dependence exhibits a U-shape pattern. The dependence is strong in the upper and lower parts of the response distribution, but it is little in the medium range.
Motivated by the success and wide implementation of the Mixed Income Housing model in the United States and other developed countries, we provide a spatial equilibrium model of jurisdiction formation to understand how jurisdictions composed of mixed-income communities provide local public goods. Individuals choose which local public good to attend on the basis of income, and there are individuals in the same location but with different income that choose different public goods at different distances. Importantly, there is an equilibrium where smaller jurisdictions are comprised of a higher proportion of poor individuals.
This paper seeks to understand the importance of changes in the fundamental factors of demand and supply, such as the urban population, wage income, urban land supply, and construction costs, in explaining the rising residential housing prices in major Chinese cities between 2002 and 2008. We propose an empirical approach that uses both city-level and residential development project-level data. Results suggest that, for most of the cities in our sample, changes in fundamental factors can account for a major proportion of the actual housing price appreciation. However, in several coastal cities, the actual increase in housing prices deviates largely from what can be predicted from fundamental changes.
This paper exploits a natural experiment created by a 2005 policy change to New Zealand's Accommodation Supplement (AS) to examine the extent to which an increase in housing subsidies increased rent. The policy change created a new AS-zone around central Auckland, with higher subsidy maxima for residents within the zone. Using administrative data on AS recipients on either side of the new zone boundary, we estimate that average support was $6.80 per week higher inside than outside the boundary in the second year after the policy change, and about one-third ($2.44) passed through to higher rent. The impacts were concentrated among families with children and, consistent with the policy changes, among higher quantiles of the rent distribution. The results imply the marginal propensity to spend on housing is about 0.35, and the elasticity of housing expenditure with respect to income is about 0.55.
With 20,945 asylum applications in 2016, the Netherlands received the tenth highest number of asylum requests in Europe. From the time of their arrival, and until a decision on their asylum requests is made, asylum seekers are sheltered in asylum seeker reception centers (ASRCs) across the country. This paper tests whether the opening of reception centers affects the prices of nearby houses. In doing so, likely differential effects across urban and non-urban areas, as well as for ASRCs of distinct capacities to host asylum seekers, are considered. The analysis uses hedonic regressions that are based on a staggered difference-in-differences design. Estimation comes from 2009–2017 information on the transaction prices of houses ( = 347,479) and the locations and opening dates of nearby ASRCs ( = 75). The results indicate that the opening of ASRCs causes the prices of some houses to fall by approximately 9.3%. However, this estimated effect pertains solely to single-family houses in less densely populated areas and for ASRC of high hosting capacity, whereas in cities no economically or statistically significant effects are found. The findings of this study have implications for the design of public policies that regard the spatial dispersion of ASRCs.
Due to recent urbanization and the increased population density around major Brazilian cities, the real estate market in the country has appreciated greatly. In addition to demand-related factors, mechanisms with the potential to limit the housing supply may have also affected the price increase in that market. The objective of this study is to investigate the impact of zoning ordinances (land-use regulations) on the average rental prices and the growth in the number of dwellings in Brazil. Through an intercity analysis and using identification methods that rely both on selection on observable and unobservable covariates, the set of evidence indicates that zoning ordinance is associated with an increment ranging from 5.3% to 6% in average rents, but does not affect the dwellings growth. Sensitivity analysis suggests that these results are not simply driven by unobservable confounders. Our evidence, thus, indicates that even being a usually well-intentioned policy, zoning ordinances tend to generate social costs that need to be taken into account in the analysis of the real-estate market in Brazil.
In Amsterdam, houses located on private land and houses with various land-lease contracts coexist. This paper estimates the market valuation of future land-lease payments on the house price. This is useful for cities (like Amsterdam) that want to offer infinite lease terms, and can be also used to estimate long-run discount rates. We investigate the impact of: (i) the number of years that the land lease has been paid in advance and (ii) the amount that must be paid up front. Depending on the specification, houses on privately owned land are, on average, 11–13% more expensive than observably equivalent houses with a (non-prepaid) land-lease contract. Each year that no land lease has to be paid increases the price of a house by approximately 0.2%. Those findings correspond to a discount rate of 4% per year.
This paper explores how Floor Area Ratio (FAR) regulations affect residents with income disparity and absentee landowners in a congested closed city. Theoretical results show that (1) an increase in FAR in a central zone may harm the utility of suburban residents due to the residential segregation pattern of heterogeneous people whereas it always increases the utility in a city with homogeneous households, and (2) how an increase in FAR changes land rents depends on the current FAR and the relative location of the zone where FAR increases. Numerical results clarify the effects of optimal FAR regulations on residents and absentee landowners. In addition, theoretical result (1) denoted above is numerically verified. Furthermore, it is found that optimal FAR gives higher benefits to high income households than to low income households regardless of the location pattern.
This paper investigates the network topology of the Korean housing market using the connectedness methodology. The basic finding is that, among various combinations of regional housing markets, Seoul has been the most influential market in Korea. We also present evidence that other metropolitan cities affect only the neighboring regions. As for the results from the rolling-sample analysis, the net directional connectedness of Seoul appears to have declined over the sample period. Although Seoul still remains the center of the Korean housing market, neighboring regions have become increasingly more influential in affecting other regional markets. These findings suggest that the policy for balanced national development might have changed the transmission mechanisms in the Korean housing market.
This article explores the role of institutional settings in determining spatial variation in urban sprawl across Europe. We first synthesize the emerging literature that links land use policies and local fiscal incentives to urban sprawl. Next, we compile a panel dataset on various measures of urban sprawl for European countries using high-resolution satellite images. We document substantial variation in urban sprawl across countries. This variation remains roughly stable over the period of our analysis (1990–2012). Urban sprawl is particularly pronounced in emerging Central and Eastern Europe but is comparatively low in Northern European countries. Urban sprawl – especially outside functional urban areas – is strongly negatively associated with real house price growth, suggesting a trade-off between urban containment and housing affordability. Our main novel empirical findings are that decentralization and local political fragmentation are significantly positively associated with urban sprawl. Decentralized countries have a 25–30% higher sprawl index than centralized ones. This finding is consistent with the proposition that in decentralized countries fiscal incentives at local level may provide strong incentives to permit residential development at the outskirts of existing developments.
With real estate markets booming in Asia, governments are trying to stabilize property prices to address deteriorating affordability conditions, especially for superstar cities. There have been various economic interventions across countries, but little has been learnt about the true effects of such policy actions for housing markets or the broader economy. In this paper, we use both macro-level economic data and micro-level house transaction datasets to evaluate the effects of the cooling measures in Singapore. We find that the policies appear to have achieved their primary goals: house prices have fallen by 10%–15% according to different price indices for the public and private sectors. We also show that there is no clear evidence that the cooling measures caused significant collateral damage to the broader economy.
This paper documents the increasing trend of adult children co-residing with elderly parents in urban China and links it with the rising housing price, which provides an incentive for young adults to save living cost through intergenerational co-residence. Using land supply as an instrument, we find that city-level housing price has a positive effect on co-residence, and this effect is larger for those who do not own a house, who have a lower level of wealth, and who are relatively younger. Husband's parents, who take relatively more responsibility to provide housing support for the young couple, are more likely to be co-resided with.