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The Macroeconomic Determinants of House Prices and Rents

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  • Shida Jakob

    (University Duisburg-Essen, Duisburg, Germany)

Abstract

Based on panel error correction models for a sample of up to 21 countries, this paper analyses the macroeconomic determinants of house prices and rents. In accordance with the existing literature, I find significantly positive effects of per capita income and bank lending on house prices, whereas the housing stock per capita and interest rates have negative effects. For rents, the results are somewhat more remarkable, indicating that both the housing stock and interest rates have a negative effect. While contradicting conventional economic theory, the latter finding might be explained by real estate investors exploiting their pricing power with varying degree depending on the level of real interest rates. Moreover, the estimated impact of interest rates on both house prices and rents varies with structural housing market characteristics. For instance, while interest rates have a more pronounced effect on house prices in countries with more developed mortgage markets, the same does not hold for the effect of interest rates on rents.

Suggested Citation

  • Shida Jakob, 2022. "The Macroeconomic Determinants of House Prices and Rents," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 242(1), pages 39-86, February.
  • Handle: RePEc:jns:jbstat:v:242:y:2022:i:1:p:39-86:n:2
    DOI: 10.1515/jbnst-2020-0043
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    More about this item

    Keywords

    house prices; housing rents; interest rates; panel error correction model;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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