The Macroeconomic Determinants of House Prices and Rents

Shida Jakob ()
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Shida Jakob: University Duisburg-Essen, Duisburg, Germany

Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), 2022, vol. 242, issue 1, 39-86

Abstract: Based on panel error correction models for a sample of up to 21 countries, this paper analyses the macroeconomic determinants of house prices and rents. In accordance with the existing literature, I find significantly positive effects of per capita income and bank lending on house prices, whereas the housing stock per capita and interest rates have negative effects. For rents, the results are somewhat more remarkable, indicating that both the housing stock and interest rates have a negative effect. While contradicting conventional economic theory, the latter finding might be explained by real estate investors exploiting their pricing power with varying degree depending on the level of real interest rates. Moreover, the estimated impact of interest rates on both house prices and rents varies with structural housing market characteristics. For instance, while interest rates have a more pronounced effect on house prices in countries with more developed mortgage markets, the same does not hold for the effect of interest rates on rents.

Keywords: house prices; housing rents; interest rates; panel error correction model (search for similar items in EconPapers)
JEL-codes: C23 E43 R21 R31 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:jns:jbstat:v:242:y:2022:i:1:p:39-86:n:2

DOI: 10.1515/jbnst-2020-0043

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