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No price like home: global house prices, 1870-2012

Listed author(s):
  • Knoll, Katharina

    (Free University of Berlin)

  • Schularick, Moritz

    ()

    (University of Bonn)

  • Steger, Thomas

    ()

    (Leipzig University)

How have house prices evolved in the long-run? This paper presents annual house price indices for 14 advanced economies since 1870. Based on extensive data collection, we are able to show for the first time that house prices in most industrial economies stayed constant in real terms from the 19th to the mid-20th century, but rose sharply in recent decades. Land prices, not construction costs, hold the key to understanding the trajectory of house prices in the long-run. Residential land prices have surged in the second half of the 20th century, but did not increase meaningfully before. We argue that before World War II dramatic reductions in transport costs expanded the supply of land and suppressed land prices. Since the mid-20th century, comparably large land-augmenting reductions in transport costs no longer occurred. Increased regulations on land use further inhibited the utilization of additional land, while rising expenditure shares for housing services increased demand.

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File URL: http://www.dallasfed.org/assets/documents/institute/wpapers/2014/0208.pdf
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Paper provided by Federal Reserve Bank of Dallas in its series Globalization and Monetary Policy Institute Working Paper with number 208.

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Length: 155 pages
Date of creation: 01 Oct 2014
Handle: RePEc:fip:feddgw:208
DOI: 10.24149/gwp208
Contact details of provider: Web page: http://www.dallasfed.org/
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