Dynamic linkages between housing and lot prices: Empirical evidence from Helsinki
No 53, Discussion Papers from Aboa Centre for Economics
The price of vacant land zoned for housing is expected to be tightly linked to housing prices. In informationally efficient markets, vacant lot price movements should not lag changes in housing prices. In practice, however, the leading role of housing appreciation with respect to vacant lot price growth may be caused by factors such as thin trading and lack of publicly available data on transactions in the lot market. Based on a vector error-correction model employing quarterly data from the Helsinki Metropolitan Area over 1988Q1-2008Q2, this study shows that housing price movements lead price changes in the market for vacant lots and housing prices react to shocks in the demand side fundamentals more rapidly than lot prices. Overall, the empirical results give support to the hypothesis that house prices respond to shocks influencing the value of developed land first, after which the price level of vacant lots reacts to the information revealed by housing prices. Hence, the results indicate that the market for lots is more informationally inefficient than the housing market. Furthermore, the empirical findings suggest that construction costs too react to income and interest rate shocks.
Keywords: Housing; land; lot prices; dynamics; construction costs (search for similar items in EconPapers)
JEL-codes: R31 R32 E31 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations View citations in EconPapers (1) Track citations by RSS feed
Downloads: (external link)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:tkk:dpaper:dp53
Access Statistics for this paper
More papers in Discussion Papers from Aboa Centre for Economics Contact information at EDIRC.
Series data maintained by Aleksandra Maslowska ().