The effect of land lease on house prices

Pieter Gautier and Aico van Vuuren

Journal of Housing Economics, 2019, vol. 46, issue C

Abstract: In Amsterdam, houses located on private land and houses with various land-lease contracts coexist. This paper estimates the market valuation of future land-lease payments on the house price. This is useful for cities (like Amsterdam) that want to offer infinite lease terms, and can be also used to estimate long-run discount rates. We investigate the impact of: (i) the number of years that the land lease has been paid in advance and (ii) the amount that must be paid up front. Depending on the specification, houses on privately owned land are, on average, 11–13% more expensive than observably equivalent houses with a (non-prepaid) land-lease contract. Each year that no land lease has to be paid increases the price of a house by approximately 0.2%. Those findings correspond to a discount rate of 4% per year.

Keywords: House prices; Land lease (search for similar items in EconPapers)
JEL-codes: R30 R38 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Working Paper: The effect of land lease on house prices (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jhouse:v:46:y:2019:i:c:s1051137719300853

DOI: 10.1016/j.jhe.2019.101646

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