Serenity or cause for concern? Real estate investors’ response to political uncertainty

Julius Range and Lars Jagemann

ERES from European Real Estate Society (ERES)

Abstract: This study examines the linkage between political uncertainty and residential real estate market behavior in Germany. Using spatial regression techniques to address neighborhood spillover effects, we identify county level residential real estate transaction activity to be negatively associated with increased political uncertainty. We measure political related uncertainty by applying the media-based Uncertainty Perception Index (UPI). We find the results to appear robust in various applied regression specification. Controlling for a broad range of market fundamentals, we find rural areas to be influenced significantly stronger by increasing political uncertainty than urban areas. Further, we use the quarterly flow of building permits to isolate the effect of uprising uncertainty on residential construction activity. Our results indicate a strong negative impact of political uncertainty on issued building permits. The results suggest that political uncertainty not only has a significant impact on the behavior of real estate investors, but also on residential developers.

Keywords: Real Estate Development; Spatial regression; uncertainty measures (search for similar items in EconPapers)
JEL-codes: R3 (search for similar items in EconPapers)
Date: 2024-01-01
New Economics Papers: this item is included in nep-ure
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