IDEAS home Printed from https://ideas.repec.org/p/zbw/iwhdps/iwh-20-09.html
   My bibliography  Save this paper

What Happened to the East German Housing Market? – A Historical Perspective on the Role of Public Funding –

Author

Listed:
  • Michelsen, Claus
  • Weiß, Dominik

Abstract

The paper analyses the development of the East German housing market after the reunification of the former German Democratic Republic and the Federal Republic of Germany in 1990. We analyse the dynamics of the East German housing market within the framework of the wellknown stockflow model, proposed by DiPasquale and Wheaton. We show that the today observable disequilibrium to a large extend is caused by postunification housing policy and its strong fiscal incentives to invest into the housing stock. Moreover, in line with the stylized empirical facts, we show that 'hidden reserves' of the housing market were reactivated since the economy of East Germany became market organized. Since initial undersupply was overcome faster than politicians expected, the implemented fiscal stimuli were too strong. In contrast to the widespread opinion that outward migration caused the observable vacancies, this paper shows that not weakness of demand but supply side policies caused the observable disequilibrium.

Suggested Citation

  • Michelsen, Claus & Weiß, Dominik, 2009. "What Happened to the East German Housing Market? – A Historical Perspective on the Role of Public Funding –," IWH Discussion Papers 20/2009, Halle Institute for Economic Research (IWH).
  • Handle: RePEc:zbw:iwhdps:iwh-20-09
    as

    Download full text from publisher

    File URL: https://www.econstor.eu/bitstream/10419/37069/1/618096973.pdf
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Edward L. Glaeser & Joseph Gyourko, 2005. "Urban Decline and Durable Housing," Journal of Political Economy, University of Chicago Press, vol. 113(2), pages 345-375, April.
    2. repec:zbw:iwhwiw:4-07-4 is not listed on IDEAS
    3. DiPasquale, Denise, 1999. "Why Don't We Know More about Housing Supply?," The Journal of Real Estate Finance and Economics, Springer, vol. 18(1), pages 9-23, January.
    4. Edward L. Glaeser & Erzo F. P. Luttmer, 2003. "The Misallocation of Housing Under Rent Control," American Economic Review, American Economic Association, vol. 93(4), pages 1027-1046, September.
    5. Kenneth Y. Chay & Michael Greenstone, 2005. "Does Air Quality Matter? Evidence from the Housing Market," Journal of Political Economy, University of Chicago Press, vol. 113(2), pages 376-424, April.
    6. Boss, Alfred & Rosenschon, Astrid, 2008. "Der Kieler Subventionsbericht: eine Aktualisierung," Kiel Discussion Papers 452/453, Kiel Institute for the World Economy (IfW).
    7. William C. Wheaton, 1999. "Real Estate “Cycles”: Some Fundamentals," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 27(2), pages 209-230, June.
    8. Charles Ka Yui Leung & Wei Wang, 2007. "An Examination of the Chinese Housing Market through the Lens of the DiPasquale- Wheaton Model: a Graphical Attempt," International Real Estate Review, Asian Real Estate Society, vol. 10(2), pages 131-165.
    9. de Leeuw, Frank & Ekanem, Nkanta F, 1971. "The Supply of Rental Housing," American Economic Review, American Economic Association, vol. 61(5), pages 806-817, December.
    10. Denise DiPasquale & William C. Wheaton, 1992. "The Markets for Real Estate Assets and Space: A Conceptual Framework," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 20(2), pages 181-198, June.
    11. Blum, Ulrich, 2007. "Honeckers langer Schatten oder die aktuelle Wirtschaftsschwäche Ostdeutschlands," Wirtschaft im Wandel, Halle Institute for Economic Research (IWH), vol. 13(4), pages 109-116.
    12. Robert P. Albon & David C. Stafford, 1990. "Rent Control and Housing Maintenance," Urban Studies, Urban Studies Journal Limited, vol. 27(2), pages 233-240, April.
    13. Cheshire, Paul & Sheppard, Stephen, 1995. "On the Price of Land and the Value of Amenities," Economica, London School of Economics and Political Science, vol. 62(246), pages 247-267, May.
    14. Donges, Juergen B. & Engels, Wolfram & Hamm, Walter & Möschel, Wernhard & Sievert, Olaf, 1990. "Wirtschaftspolitik für das geeinte Deutschland," Kronberger Kreis-Studien 22, Stiftung Marktwirtschaft / The Market Economy Foundation, Berlin.
    15. Knight, John R. & Sirmans, C. F., 1996. "Depreciation, Maintenance, and Housing Prices," Journal of Housing Economics, Elsevier, vol. 5(4), pages 369-389, December.
    16. Hoyt, William H. & Rosenthal, Stuart S., 1997. "Household Location and Tiebout: Do Families Sort According to Preferences for Locational Amenities?," Journal of Urban Economics, Elsevier, vol. 42(2), pages 159-178, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Kholodilin, Konstantin A. & Michelsen, Claus & Ulbricht, Dirk, 2018. "Speculative price bubbles in urban housing markets," EconStor Open Access Articles, ZBW - Leibniz Information Centre for Economics, pages 1957-1983.
    2. Joseph DeSalvo, 2017. "Teaching the DiPasquale-Wheaton Model," Working Papers 0117, University of South Florida, Department of Economics.
    3. Marius Claudy and Claus Michelsen, 2016. "Housing Market Fundamentals, Housing Quality and Energy Consumption: Evidence from Germany," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4).
    4. Konstantin A. Kholodilin & Claus Michelsen & Dirk Ulbricht, 2014. "Speculative Price Bubbles in Urban Housing Markets in Germany," Discussion Papers of DIW Berlin 1417, DIW Berlin, German Institute for Economic Research.
    5. Dominik Weiß & Claus Michelsen, 2011. "The improvement of housing conditions in post com-munist Germany – Market Mechanisms and Subsidy Impacts," ERSA conference papers ersa11p505, European Regional Science Association.
    6. Konstantin Kholodilin, 2015. "Speculative Bubbles in Urban Housing Markets in Germany," ERSA conference papers ersa15p67, European Regional Science Association.

    More about this item

    Keywords

    housing market transition; housing subsidies; housing supply; East Germany; Transformation des Immobilienmarkts; Subventionen für Immobilien; Wohnraumversorgung; Ostdeutschland;

    JEL classification:

    • D5 - Microeconomics - - General Equilibrium and Disequilibrium
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
    • R28 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Government Policy
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:zbw:iwhdps:iwh-20-09. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (ZBW - Leibniz Information Centre for Economics). General contact details of provider: http://edirc.repec.org/data/iwhhhde.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.