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The influence of a mortgage interest and capital deduction policy on house prices

Author

Listed:
  • Wouter Vangeel
  • Laurens Defau
  • Lieven De Moor

Abstract

Purpose - Since 2005, Belgian housing prices have strongly increased. As the timing coincides with the implementation of a new fiscal package in order to stimulate homeownership, our study attempts to provide an understanding whether the mortgage interest and capital deduction (MICPD) policy has had the side-effect of increasing housing prices while, at the same time, controlling for key housing price determinants. Design/methodology/approach - A fixed-effects regression model is used on a panel dataset of the three Belgian regions over the period 1995–2015. Findings - Estimations are carried out separately for different house types, being useful as our empirical analysis ascertains a significant price-increasing effect for ordinary houses and apartments but a significant price-reducing effect for villas. In addition, we find, among other things, that interest rates' influence has been less substantial than commonly thought. Originality/value - These results are relevant for all governments willing to stimulate homeownership through fiscal stimuli.

Suggested Citation

  • Wouter Vangeel & Laurens Defau & Lieven De Moor, 2020. "The influence of a mortgage interest and capital deduction policy on house prices," Journal of Property Investment & Finance, Emerald Group Publishing Limited, vol. 38(6), pages 563-577, March.
    • Handle: RePEc:eme:jpifpp:jpif-08-2019-0102
    DOI: 10.1108/JPIF-08-2019-0102
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