 Land leverage and the housing market: Evidence from Germany1Journal of Housing Economics, 2021, vol. 51, issue C Abstract: This paper modifies a conventional empirical macroeconomic model of the housing market to demonstrate the pivotal role of land prices not only for house prices but also for housing supply. Building on the land leverage hypothesis, the impacts of macroeconomic shocks are shown to differ in magnitude but not in sign for the construction and land price component of house prices. We argue that land prices are an important channel of shock transmission to residential investment. The model features a supply response, which is allowed to vary depending on whether the macroeconomic impulses are transmitted via construction or land prices. The positive supply effects of expansionary shocks work via their positive effects on land prices. In contrast, construction price rises in an improving macroeconomic environment tend to dampen residential investment, while they add upward pressure to overall house prices. Through the lens of the model we provide typical elasticities for the German housing market. Keywords: Residential property prices; Residential investment; Land prices (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jhouse:v:51:y:2021:i:c:s1051137720300826 DOI: 10.1016/j.jhe.2020.101746 Access Statistics for this article Journal of Housing Economics is currently edited by H. O. Pollakowski More articles in Journal of Housing Economics from Elsevier |
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