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The causal effect of house prices on mortgage demand and mortgage supply: Evidence from Switzerland

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  • Basten, Christoph
  • Koch, Catherine

Abstract

We identify the causal effect of house prices on mortgage demand and supply in Switzerland by exploiting exogenous shocks to immigration and thereby to house prices. Detailed micro data on individual requests and offers allow to close down possible other channels. We find that 1% higher house prices imply 0.52% higher mortgage amounts. The full partial correlation of 0.78% suggests also positive feedback from mortgage volumes to house prices. While we find higher house prices to increase mortgage demand, banks respond if anything with fewer offers and higher rates, especially later in the boom and for highly leveraged households.

Suggested Citation

  • Basten, Christoph & Koch, Catherine, 2015. "The causal effect of house prices on mortgage demand and mortgage supply: Evidence from Switzerland," Journal of Housing Economics, Elsevier, vol. 30(C), pages 1-22.
    • Handle: RePEc:eee:jhouse:v:30:y:2015:i:c:p:1-22
    DOI: 10.1016/j.jhe.2015.07.001
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    Citations

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    Cited by:

    1. Koeniger, Winfried & Ramelet, Marc-Antoine, 2018. "Home Ownership and Monetary Policy Transmission," IZA Discussion Papers 11950, Institute for the Study of Labor (IZA).
    2. repec:aes:amfeco:v:46:y:2017:i:19:p:682 is not listed on IDEAS
    3. repec:spr:sjecst:v:153:y:2017:i:1:d:10.1007_bf03399434 is not listed on IDEAS
    4. Nocera, Andrea & Roma, Moreno, 2017. "House prices and monetary policy in the euro area: evidence from structural VARs," Working Paper Series 2073, European Central Bank.
    5. Christophe André, 2016. "Household debt in OECD countries: stylised facts and policy issues," Chapters from NBP Conference Publications, Narodowy Bank Polski, Economic Research Department.
    6. Adams, Zeno & Blickle, Kristian, 2016. "Immigration, Real Estate Prices and the Consumption Decisions of Native Households," Working Papers on Finance 1615, University of St. Gallen, School of Finance.
    7. Winfried Koeniger & Marc-Antoine Ramelet, 2018. "Home Ownership and Monetary Policy Transmission," SOEPpapers on Multidisciplinary Panel Data Research 1007, DIW Berlin, The German Socio-Economic Panel (SOEP).
    8. Zeno Adams & Kristian Blickle, 2018. "Immigration And The Displacement of Incumbent Households," Working Papers on Finance 1809, University of St. Gallen, School of Finance.

    More about this item

    Keywords

    House prices; Mortgage demand; Mortgage supply; Instrumental variables;

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand

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