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Testing Housing Price Drivers in Santiago de Chile: A Hedonic Price Approach

Testing Housing Price Drivers in Santiago de Chile: A Hedonic Price Approach

Hedonic modelling is an empirical analysis technique that is widely used to review the housing market and unpack the main determinants of price. A correct determination of housing price drivers allows a weighted prediction of the value of each dwelling for sale or rent. This paper reviews the fundamental determinants of housing prices that have been published in the literature to see which ones have a better predictive fit for the case of the housing market in the city of Santiago, Chile. From a record of 456,000 property transactions, a dataset composed of 11 explanatory variables is elaborated. Through a semi-logarithmic regression, 4 variables that contribute to explaining the formation of housing prices in Santiago, Chile, are identified. The results indicate that the socioeconomic characterisation of urban areas where housing is traded, the price of copper on the London Metal Exchange, the mortgage interest rate, the age of residential buildings are the main drivers for the main drivers of prices in Santiago. Given the crisis of access to housing in Chile, the article provides relevant information for decision-makers in housing policy.

26.10.2023 | Francisco Vergara-Perucich | Volume: 10 | Issue: 2 | Pages: 44-57 | 10.13060/23362839.2023.10.2.558

The Role of Housing Costs in Central Banks’ Inflation Targeting Regimes: The Cases of the Reserve Bank of Australia and the Bank of England

The Role of Housing Costs in Central Banks’ Inflation Targeting Regimes: The Cases of the Reserve Bank of Australia and the Bank of England

Since the 1990s it has become common for central banks to be charged with using interest rates to meet consumer price inflation (CPI) targets. This article examines the cases of the Reserve Bank of Australia (RBA) and the Bank of England (BoE) and finds that whereas the RBA’s CPI target includes a housing cost element, the BoE’s does not. Moreover, it finds that contrasting treatments of housing costs produce different results, depending on whether the index includes mortgage interest as a housing cost. Whilst central banks dislike CPIs that include an element of mortgage interest because of the apparently perverse outcome of increasing interest rates, they also lack credibility by excluding such an important element of the cost of living. Credibility demands that the 30-year consensus on inflation targeting by monetary policy be replaced by a broader set of tools – including fiscal policy – to control inflation.

17.10.2023 | Mark Stephens | Volume: 10 | Issue: 2 | Pages: 15-28 | 10.13060/23362839.2023.10.2.556

The Role of Mortgage Subsidies in the Croatian Economic Growth Strategy: a Political-Economy Approach to the SSK

The Role of Mortgage Subsidies in the Croatian Economic Growth Strategy: a Political-Economy Approach to the SSK

Since 2017, Croatian housing policy has focused on promoting homeownership through the SSK programme – a form of mortgage subsidisation that covers a proportion of housing costs. Although this policy aimed to improve affordability and increase homeownership, a recent economic evaluation has shown that the SSK has in fact contributed to rising house prices and has been ineffective at raising the homeownership rate. While econometric research has identified the impact that the SSK has had on house price volatility and affordability, the underlying factors leading to the implementation of this subsidy, as well as its broader societal impacts, remain under-researched. Through a political-economy lens, this paper analyses the context that led to the inception of the SSK, its core targeting principles, and its impact on the housing market. We ask: How does this subsidy position the Croatian housing market within the national strategy for economic growth and social policy provision?  We argue that this policy’s impact on housing markets is twofold. First, the SSK reinforces a shift towards financialised growth through increased asset prices. Second, this subsidy shifts the focus of social policy towards mortgage markets, thereby furthering the privatisation of the welfare state and favouring middle-income groups. This paper’s contribution resides in critically discussing the SSK beyond its stated goals and contextualising it within the broader model of economic growth dependent on private finance. Through interviews with relevant stakeholders, descriptive data indicators, and a review of policy documents, this paper characterises the Croatian growth strategy as a form of small-scale financialisation that relies on aligning social policy with mortgage markets. Finally, we position the SSK within a wider array of finance-led housing policies and suggest the formulation of a comprehensive housing strategy tailored to the broader segments of Croatian society.

16.6.2023 | Alejandro Fernandez, Gojko Bezovan | Volume: 10 | Issue: 1 | Pages: 50-65 | 10.13060/23362839.2023.10.1.553

Housing Market in Central European City during the COVID-19 Pandemic

Housing Market in Central European City during the  COVID-19 Pandemic

Many aspects of the global economy changed during the Covid-19 pandemic, including the real estate market. This study examines the primary residential property market in Opole during the Covid-19 pandemic. It uses property transaction data from 2018 to 2021 to conduct statistical analyses and independent group tests and also takes into account the real-estate price trend from 2014 to 2020. The study finds that both property prices and preferences relating to the structure and location of housing changed during the pandemic. In the case of Opole, the number of transactions involving residential units in the primary market increased in 2020 compared to previous years. After adjusting the unit price value of residential properties for the trend in the pre-pandemic period, the study finds that there was also an increase in property transaction prices. The study confirms three important facts relating to phenomena that are occurring globally in cities today. First, local communities are more diverse in terms of the economic heterogeneity of real estate buyers. Second, unlike big urban areas, small cities may be more resistant to the process of citizens migrating to suburban areas, thereby limiting the negative phenomenon of urban sprawl. Third, the housing real estate market in small cities is considered a reliable form of investment of assets, as real estate prices increased during the Covid-19 pandemic.

14.6.2023 | Jan K. Kazak, Natalia A. Kłysz, Joanna A. Kamińska | Volume: 10 | Issue: 1 | Pages: 27-38 | 10.13060/23362839.2023.10.1.551

Applying the AD-AS Model to the Housing Market of Post-Socialist Economies

Applying the AD-AS Model to the Housing Market of Post-Socialist Economies

We propose applying the standard aggregate demand and aggregate supply model (AD-AS) to the housing market. It is a very simple and intuitive tool that can help shed light on the major forces at play in the market and that can supplement the use of the general equilibrium and dynamic stochastic equilibrium models (DSGE). The latter models are very sophisticated and aim to cover many aspects of the economy, but they require a significant number of long time series to estimate the model parameters. However, in many countries, such as post-socialist countries, the time series are short. Those models moreover cover only real house prices, but in certain situations we should consider real and nominal prices at the same time.

31.3.2023 | Jacek Łaszek, Krzysztof Olszewski | Volume: 10 | Issue: 1 | Pages: 14-26 | 10.13060/23362839.2023.10.1.550

Vertical Integration & Performance in Residential Real Estate

Vertical Integration & Performance in Residential Real Estate

Vertical integration is a growth strategy whereby a firm engages in multiple stages of the value chain. Although the benefits of vertical integration are well documented, few studies have examined its relevance in real estate. In response to this lack of research, this paper explores tenant perceptions of property managers’ vertical integration and effectiveness. The results of this international study show the benefits of vertical integration extend to residential real estate, such that renters are more trusting, loyal, committed, and desirable when they perceive their property manager as vertically integrated. This paper also uncovers a concering finding that many tenants are living in unaffordable rental accomodations, requiring further research. This study contributes to a large body of vertical integration literature and extends the empirical examinations to real estate and property management.

30.3.2023 | Grant Alexander Wilson, Jason Jogia, Gabriel Millard | Volume: 10 | Issue: 1 | Pages: 1-13 | 10.13060/23362839.2023.10.1.549

The Housing Satisfaction of Polish Households and Its Determinants

The Housing Satisfaction of Polish Households and Its Determinants

The level of satisfaction that households have with their housing is important for people to function properly, as it largely determines their life satisfaction. Housing satisfaction is a multidimensional concept that can be defined, measured, and analysed in various ways. The aim of the article is to identify the housing satisfaction of Polish households in terms of living space, housing standard, and housing expenses, and to identify the main determinants of housing satisfaction. Factors that have a major impact on housing satisfaction are classified based on a literature review. The sources of Poles’ housing satisfaction are identified using ordered logistic regression. This article is one of the first attempts to analyse housing satisfaction in a post-socialist Central and Eastern European economy.

25.10.2022 | Konrad Żelazowski, Ewa Kucharska-Stasiak, Anna Miklaszewska, Beata Wieteska-Rosiak | Volume: 9 | Issue: 2 | Pages: 30-42 | 10.13060/23362839.2022.9.2.547

Diving in at the ‘Bottom End’: The Risk Awareness and Risk Management Practices of Sub £65K Landlords

Diving in at the ‘Bottom End’: The Risk Awareness and Risk Management Practices of Sub £65K Landlords

Significant growth in Scotland’s private rented sector over the last 25 years has been led by a large number of individual lay investors/landlords who each own a smattering of properties. These characteristics, which are replicated in several countries where neoliberal housing policies prevail, have implications for the efficacy of PRS investments, but also for conditions and the stability of investment patterns within the sector. This study examines landlord investment risk awareness and behaviours via qualitative interviews with a small sample of Scottish landlords operating at the ‘bottom end’ of the market, which is disproportionately home to vulnerable groups and where some investment risks are believed to be more acute. The findings suggest that some landlords have relatively low levels of risk awareness, fail to adequately consider risk prior to investing in the PRS, have mixed success in selecting and implementing risk management and mitigation strategies, and incur significant risk-borne costs, which can limit returns.

12.10.2022 | Andrew Watson | Volume: 9 | Issue: 2 | Pages: 1-17 | 10.13060/23362839.2022.9.2.545
Housing Finance in the Aftermath of the Foreign-Currency Mortgage Crisis in Eastern Europe

Debt Relief or Exit: The Long-Term Effects of Forex Loans on Latvian Households

Debt Relief or Exit: The Long-Term Effects of Forex Loans on Latvian Households

The stubborn decision of the Latvian government to join the eurozone at any cost put a great burden on Latvian households after the crisis of 2008. Nevertheless, no popular protest movement emerged to change the course of this decision. This study discusses why Latvians undertook individual strategies to cope with the forex loan crisis. Particularly, I look at the choice between formal debt relief procedures and emigration as alternative individual strategies for defaulted debtors. These programmes have not reversed the negative migration trends or significantly decreased the number of Latvian households in arrears. Debt discharge is mainly attainable for wealthy individuals who are able to mobilise their financial and kinship resources. Worse-off debtors cannot attain debt discharge or are stigmatised during the process. Alternatively, emigration has offered a way to cope with overindebtedness and keep up with mortgages and consumer loan payments for a much larger segment of the debtor population.

24.6.2022 | Andris Saulitis | Volume: 9 | Issue: 1 | Pages: 48-56 | 10.13060/23362839.2022.9.1.540

Self-reported and Market Home Values in Housing Wealth Inequality Measurement: Evidence from Warsaw and Prague

Self-reported and Market Home Values in Housing Wealth Inequality Measurement: Evidence from Warsaw and Prague

This paper aims to examine whether self-reported home valuations can be a substitute for objective market data in studies on the level of housing wealth inequality. In order to achieve this aim, information on subjective values of flats and their features in Warsaw (Poland) and Prague (Czechia) was used. Next, hedonic models were estimated to calculate the objective values of these residential properties. The results indicated that, on average, homeowners overestimated their real estate by 2.10% in Warsaw and underestimated by 5.49% in Prague. Finally, using tests for the equality of variances, it was examined whether the level of housing wealth inequality differed significantly when calculated using subjective and objective home values. The findings showed that self-reported home values cannot serve as a perfect proxy for market values when assessing the level of housing wealth inequality in both cities.

5.5.2022 | Mateusz Tomal | Volume: 9 | Issue: 1 | Pages: 29-38 | 10.13060/23362839.2022.9.1.538

Sustainable Recovery? Deciphering Hungary’s Residential Property Market before the Pandemic

Sustainable Recovery? Deciphering Hungary’s Residential Property Market before the Pandemic

This paper develops some analytical perspectives for a proper assessment of the dynamics observed on the Hungarian residential property market over the last decade. These dynamics are examined in comparison to official policy objectives. On the one hand, sustainable development and social balance were particularly urgent issues after the last financial crisis. On the other, the residential property market was officially instrumentalised to achieve them. We examined real estate market processes using data from the Hungarian Central Statistical Office and found a change in investment motives and in the main groups of actors dominant in the market, and we also examined the role of foreign investment. At the aggregate national level, the past decade looks like a process of recovery. Nonetheless, the factors relevant for the observable dynamics do not seem to correspond to the goals also formulated in the new constitution, but rather document the investment fever of certain groups.

4.4.2022 | Jörg Dötsch, Tamás Ginter | Volume: 9 | Issue: 1 | Pages: 16-28 | 10.13060/23362839.2022.9.1.537

Why Has the COVID-19 Pandemic Had a Limited Impact on the Primary Housing Market in Poland?

Why Has the COVID-19 Pandemic Had a Limited Impact on the Primary Housing Market in Poland?

In this paper we present the first insight about the impact of the COVID epidemic on the pri-mary housing market in Poland, with a focus on Warsaw which is the largest market. We ex-plain the structural features that allowed the market to return to pre-shock levels after the pandemic shock. Contrary, after the 2007-2008 global financial crisis the negative consequences lasted for several years. This time a sharp monetary policy and fiscal intervention was carried out. Moreover, the developer sector is much more mature, has expanded its production capaci-ties. We show empirically that the monopolistic competition of developers allowed them to restrict excessive demand that was observed before the COVID broke out. In this way they were able to increase prices despite the economic problems. Another important structural change was the increased housing demand, mainly for investment housing, which was fi-nanced predominantly with cash and contributed to the development of the rental market. We approximate the investment demand, which was generated by private households that pur-chased flats for rental, with the help of a simple demand and supply model.

12.7.2021 | Hanna Augustyniak, Jacek Łaszek, Krzysztof Olszewski, Joanna Waszczuk | Volume: 8 | Issue: 2 | Pages: 1-15 | 10.13060/23362839.2021.8.2.534
Short-Term Rentals and the Housing Market

Challenging the Discourse around the Impacts of Airbnb through Suburbs Not Cities: Lessons from Australia and COVID-19

Challenging the Discourse around the Impacts of Airbnb through Suburbs Not Cities: Lessons from Australia and COVID-19

Supporters of short-term rental (STR) platforms state that STRs represent a small fraction of the housing market of major cities, and therefore have little impact on rents. However, there is emerging evidence that suggests that STRs have highly localised impacts. In this article, we use the natural experiment of the pause in tourism caused by the COVID-19 pandemic to highlight the impact of a decrease in STR listings on rental markets in the case study city of Hobart, Australia. We find that rental affordability has improved in Hobart’s STR-dense suburbs with the increased vacancies from the underutilised STR properties. These results provide evidence of the impact of STRs on local housing markets when analysed from a finer scale than the whole of city approach. The focus on local housing markets help local communities and city governments build an argument for the impact of STRs on tight housing markets.

20.6.2021 | Caitlin Buckle, Peter Phibbs | Volume: 8 | Issue: 1 | Pages: 141-149 | 10.13060/23362839.2021.8.1.530

The COVID-19 Pandemic, Airbnb and Housing Market Dynamics in Warsaw

The COVID-19 Pandemic, Airbnb and Housing Market Dynamics in Warsaw

In this study, we analyse the impact of COVID-19 on house rents and prices in Warsaw, the capital of Poland. Hedonic indexes indicate a slight increase in prices (ca. 1.2%) and a substantial drop in long-term rents (ca. -7.7%) between March 2020 and December 2020. The largest decline in rents occurred in centrally located neighbourhoods, which was largely due to the inflow of new housing supply from the short-term rental market (the Airbnb Warsaw market shrank by almost 30% in December 2020 y/y). Using hedonic methods, we show the effect of the shrinking Airbnb market on the drop in long-term rents. The study indicates the elasticity of rents with respect to Airbnb supply, with a 1% change in Airbnb listings leading to a 0.031% change in rents.

15.6.2021 | Radoslaw Trojanek, Michal Gluszak, Michal Hebdzynski, Justyna Tanas | Volume: 8 | Issue: 1 | Pages: 72-84 | 10.13060/23362839.2021.8.1.524

Decomposing Housing Unaffordability

Decomposing Housing Unaffordability

A US household is considered ‘rent burdened’ when its rent exceeds 30% of its income. This simple ratio can be decomposed to better understand the sources of unaffordability across space. To demonstrate this new approach, I rewrite the equation for rent burden as a sum of four factors: rent gap, income gap, excess size cost, and demographic baseline, and show that US rental unaffordability is mostly the result of low incomes. Focusing on the New England region, however, I show that high rent is the primary cause of unaffordability in high-cost, high-wage metro areas. This decomposition can help affordability advocates prioritise strategies appropriately across space.

6.5.2021 | Salim Furth | Volume: 8 | Issue: 1 | Pages: 62-71 | 10.13060/23362839.2021.8.1.523

Normalisation of the Speculative Frame Method and Its Application to the Housing Market in Poland

Normalisation of the Speculative Frame Method and Its Application to the Housing Market in Poland

This article proposes the normalisation of the speculative frame method for identifying real estate bubbles, price shocks, and other disturbances in the real estate market. This index-based method relies on time series data and real estate prices. In this article, the speculative frame method was elaborated and normalised with the use of equations for normalising data sets and research methodologies. The method is discussed on the example of the Polish housing market.

22.3.2021 | Justyna Brzezicka, Radosław Wiśniewski | Volume: 8 | Issue: 1 | Pages: 36-46 | 10.13060/23362839.2021.8.1.521

Housing Market Access in the Lisbon Metropolitan Area: Between the Financial and the Pandemic Crises

Housing Market Access in the Lisbon Metropolitan Area: Between the Financial and the Pandemic Crises

The Portuguese housing market underwent major transformations between 2010 and 2020. Until then, a delicate but resentful stability had long existed, with distorted rent schemes and low annual price increases proportional to the national economy and the income of the Portuguese population. After the financial crisis, several internal and external variables converged to dramatically change this scenario. In recent years, a growing number of researchers have centred their attention on the difficulties that the Portuguese urban middle-class populations are facing in trying to find homes. This paper analyses these challenges and their impact quantitatively, focusing on the affordability of housing for purchase or rent and considering synthetic indicators for average household incomes in the Lisbon Metropolitan Area between the beginning of 2016 and the end of 2019. The results show that the cost of buying or renting a house in the main Portuguese urban system has become much more detached from local incomes. The article concludes with reflections on the structural reasons for the enduring inequalities in the housing markets and the difficulties recognising territorial cohesion and spatial justice as important elements shaping urban and housing policies in Portugal.

24.11.2020 | Gonçalo Antunes, João Seixas | Volume: 7 | Issue: 2 | Pages: 58-72 | 10.13060/23362839.2020.7.2.515

Short-term Rentals, Housing Markets and COVID-19: Theoretical Considerations and Empirical Evidence from Four Austrian Cities

Short-term Rentals, Housing Markets and COVID-19: Theoretical Considerations and Empirical Evidence from Four Austrian Cities

Prior to the onset of the pandemic, evidence on the conversion of regular rental housing into permanent holiday homes has fuelled concerns that Airbnb and other short-term rentals contribute to the shortage of affordable homes and to the displacement of regular residents in cities with high housing demand. When the pandemic set in, the media was quick to speculate that holiday homes would be returned to the regular rental market. This paper provides some theoretical reflections on the factors that are driving and impeding such a development and presents preliminary results from an ongoing research project that empirically traces the impacts of COVID-19 on the rental housing market based on an analysis of real estate listings in four large Austrian cities. We argue that a current shift to the regular rental market is likely, but that the medium- and long-term development is uncertain. Empirically, we demonstrate that such a shift has occurred in all four cities considered. We do not find evidence, however, that the increased rental housing supply has dampened rent levels.

23.11.2020 | Justin Kadi, Antonia Schneider, Roman Seidl | Volume: 7 | Issue: 2 | Pages: 47-57 | 10.13060/23362839.2020.7.2.514

The Spatial Correlation between the Spread of COVID-19 and Vulnerable Urban Areas in Santiago de Chile

The Spatial Correlation between the Spread of COVID-19 and Vulnerable Urban Areas in Santiago de Chile

This article identifies the spatial correlation between the social determinants of health in the housing area (housing prices, overcrowding, poor-quality building materials, and household socioeconomic vulnerability) and the spread of COVID-19 in Santiago de Chile. The research used data from the 2017 Census conducted by the National Institute of Statistics of Chile and data on confirmed cases of COVID-19 (PCR) by communes provided by/obtained from Chile’s Ministry of Health. The article provides a two-fold examination/analysis of the spatial correlation using the Pearson measure to observe how the virus spread from areas with high-quality housing in the early stage of the contagion to then become concentrated in areas with low-quality of housing. The second examination/analysis is a multiple linear regression to identify the housing factors that inform virus propagation. The test results show that of the four social determinants of health relating to housing assessed here, housing prices is the variable that best predicts how the social determinants of health based on housing explain the progress of the pandemic for the Santiago case, following the collinearity factors according to the data used in this study. The conclusions suggest that public policy should treat housing quality as a factor in public health and health risks that needs to be addressed with a transdisciplinary approach to urban planning in Chile.

29.10.2020 | Francisco Vergara-Perucich, Juan Correa-Parra, Carlos Aguirre-Nuñez | Volume: 7 | Issue: 2 | Pages: 21-35 | 10.13060/23362839.2020.7.2.512

Towards a Political Economy of the Private Rental Sector

Towards a Political Economy of the Private Rental Sector

This article sets out a theoretical framework for the political economy of the private rental sector, with a particular focus on the question of inequality. It brings together three existing bodies of research. First, macro-accounts of social stratification and wealth inequality. Second, Marxian critiques of the antagonism between accumulation and social reproduction. Third, qualitative accounts of tenants’ experiences of housing inequality. The article synthesizes these three literatures to put forward a political economy approach which can capture the multi-dimensional and multi-scale nature of both ‘housing’ and ‘home’ in the private rental sector. In so doing, it contributes to recent research on ‘generation rent’, in particular the related class and generational inequalities, as well as wider debates on the political economy of housing.

30.5.2020 | Michael Byrne | Volume: 7 | Issue: 1 | Pages: 103-113 | 10.13060/23362839.2020.7.1.507
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