Das House Kapital
Benjamin Larin () and
Thomas Steger ()
No 523, FSES Working Papers from Faculty of Economics and Social Sciences, University of Freiburg/Fribourg Switzerland
The housing wealth-to-income ratio has been increasing in most developed economies since the 1950s. We provide a novel theory to explain this long-term pattern. We show analytically that house prices grow in the steady state if i) the housing sector is more land-intensive than the non-housing sector, or ii) technological progress in the construction sector is weaker than in the non-housing sector. Despite growing house prices and housing wealth, the housing wealth-to income ratio is constant in steady state. We hence study the dynamics in the housing wealth-to-income ratio by computing transitions. The model is calibrated separately to the US, UK, France, and Germany. On average, we replicate 89 percent of the observed increase in the housing wealth-to-income ratio. The key for replicating the data is the differentiation between residential land as a non-reproducible factor and residential structure as reproducible factor. The transition process from the calibrated model points to two driving forces of an increasing housing wealth-to-income ratio: i) A long-lasting construction boom that brought about a pronounced build-up in the stock of structures and ii) an increase in the demand for residential land that resulted in surging residential land prices.
Keywords: Housing Wealth; Economie Growth; Wealth-to-Income Ratio; House Price; Land Price (search for similar items in EconPapers)
JEL-codes: E10 E20 O40 (search for similar items in EconPapers)
Pages: 67 pages
New Economics Papers: this item is included in nep-cwa, nep-dge, nep-mac and nep-ure
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