The influence of a mortgage interest and capital deduction policy on house prices

Vangeel, Wouter; Defau, Laurens; Moor, Lieven De

doi:10.1108/jpif-08-2019-0102

Cited by 7 publications

(32 citation statements)

References 19 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Although it has been long established that interest rates are a fundamental house price determinant (Muth, 1988), Vangeel et al (2020) found that interest rates' influence has been less substantial than commonly thought. Dr€ oes and Francke (2018) showed that liquidity (turnover) is a major determinant of house price dynamics and that gross domestic product, interest rates, and momentum coefficient estimates are upward biased if liquidity is not considered when calculating house returns.…”

Section: Literature Reviewmentioning

confidence: 97%

See 1 more Smart Citation

House price dynamics in Iberian Metropolitan Statistical Areas: slope heterogeneity, cross-sectional dependence and elasticities

Cunha¹,

Lobão

2022

JERER

View full text Add to dashboard Cite

PurposeThis paper studies the dynamics and elasticities of house prices in Spain and Portugal (Iberia) at the Metropolitan Statistical Area (MSA) level, addressing panel regression problems such as heterogeneity and cross-sectional dependence between MSA.Design/methodology/approachThe authors develop a two steps study. First, five distinct estimation methodologies are applied to estimate the long-term house price equilibrium of the Iberian MSA house market: Mean Group (MG), Fully Modified Ordinary Least Square (FMOLS) MG (FMOLS-MG), FMOLS Augmented MG (FMOLS-AMG), Common Correlated Effects MG (CCEMG) and Dynamic CCEMG (DCCEMG). FMOLS-AMG is found to be the best estimator for the long-term model. Second, an additional five distinct estimation methodologies are applied to estimate the short-term house price dynamics using the long-term FMOLS-AMG estimated price in the error-correction term of the short-term dynamic house price model: OLS Fixed Effects (FE), OLS Random Effects (RE), MG, CCEMG and DCCEMG. DCCEMG is found to be the best estimator for the short-term model.FindingsThe results show that in the long run Iberian house prices are inelastic to aggregate income (0.227). This is a much lower elasticity than what was previously found in US MSA house price studies, suggesting that there are other factors explaining Iberian house prices. According to our study, coastal MSA presents an inelastic housing supply and a price to income elasticity close to one, whereas inland MSA are shown to have an elastic supply and a non-significant price to income elasticity. Spatial differences are important and cross-section dependence is prevalent, affecting estimates in conventional methodologies that do not account for these limitations, such as OLS-FE and OLS-RE. Momentum and mean reversion are the main determinants of short-term dynamics.Practical implicationsRecent econometric advances that account for slope heterogeneity and cross-section dependence produce more accurate estimates than conventional panel estimation methodologies. The results suggest that house markets should be analyzed at the metropolitan level, not at the national level and that there are significant differences between short-term and long-term house price determinants.Originality/valueTo the best of the authors' knowledge, this is the first study applying recent econometric advances to the Iberian MSA house market.

show abstract

Section: Literature Reviewmentioning

confidence: 97%

“…Although it has been long established that interest rates are a fundamental house price determinant (Muth, 1988), Vangeel et al. (2020) found that interest rates' influence has been less substantial than commonly thought.…”

Section: Literature Reviewmentioning

confidence: 99%

House price dynamics in Iberian Metropolitan Statistical Areas: slope heterogeneity, cross-sectional dependence and elasticities

Cunha¹,

Lobão

2022

JERER

View full text Add to dashboard Cite

show abstract

“…Interest rates (i.e. credit interest rate, government bond interest rate, mortgage interest rate) are considered as a variable in the studies of Ayuso and Restoy (2007), Égert and Mihaljek (2007), Pashardes and Savva (2009), Lebe and Akbaş (2014), Hatipoğlu and Tanrıvermiş (2017), Öztürk et al (2018), Mohan et al (2019), Gözübüyük and Koy (2020), Pontiggia and Sivitanides (2020) and Vangeel et al (2020). Taking into account these studies, we include interest rate as a variable in this study.…”

Section: Literature Reviewmentioning

confidence: 99%

“…Rent also plays a major role in housing prices because there is a high correlation between rent, housing prices and return on investment. Ayuso and Restoy (2007), Öztürk et al (2018) and Vangeel et al (2020) consider rent in explaining housing prices. By benefitting from these studies, we include rent as a variable and a positive relationship is expected between housing prices and rent.…”

Section: Literature Reviewmentioning

confidence: 99%

Housing prices in emerging countries during COVID-19: evidence from Turkey

Kartal

Depren

2021

IJHMA

View full text Add to dashboard Cite

Purpose By considering the rapid and continuous increase of housing prices in Turkey recently, this study aims to examine the determinants of the residential property price index (RPPI). In this context, a total of 12 explanatory (3 macroeconomic, 8 markets and 1 pandemic) variables are included in the analysis. Moreover, the residential property price index for new dwellings (NRPPI) and the residential property price index for old dwellings (ORPPI) are considered for robustness checks. Design/methodology/approach A quantile regression (QR) model is used to examine the main determinants of RPPI in Turkey. A monthly time series data set for the period between January 2010 and October 2020 is included. Moreover, NRPPI and ORPPI are examined for robustness. Findings Predictions for RPPI, NRPPI and ORPPI are carried out separately at the country (Turkey) level. The results show that market variables are more important than macroeconomic variables; the pandemic and rent have the highest effect on the indices; The effects of the explanatory variables on housing prices do not change much from low to high levels, the COVID-19 pandemic and weighted average cost of funding have a decreasing effect on indices while other variables have an increasing effect in low quantiles; the pandemic and monetary policy indicators have a negative and significant effect in low quantiles whereas they are not effective in high quantiles; the results for RPPI, NRPPI and ORPPI are consistent and robust. Research limitations/implications The results of the study emphasize the importance of the pandemic, rent, monetary policy indicators and interest rates on the indices, respectively. On the other hand, focusing solely on Turkey and excluding global variables is the main limitation of this study. Therefore, the authors encourage researchers to work on other emerging countries by considering global variables. Hence, future studies may extend this study. Practical implications The COVID-19 pandemic and market variables are determined as influential variables on housing prices in Turkey whereas macroeconomic variables are not effective, which does not mean that macroeconomic variables can be fully ignored. Hence, the main priority should be on focusing on market variables by also considering the development in macroeconomic variables. Social implications Emerging countries can make housing prices stable and affordable, which will increase homeownership. Hence, they can benefit from stability in housing markets. Originality/value The QR method is performed for the first time to examine housing prices in Turkey at the country level according to the existing literature. The results obtained from the QR analysis and policy implications can also be used by other emerging countries that would like to increase homeownership to provide better living conditions to citizens by making housing prices stable and keeping them under control. Hence, countries can control housing prices and stimulate housing affordability for citizens.

show abstract

“…In addition, the academic literature on fiscal stimuli has focused almost exclusively on a single country (see e.g. Mian and Sufi, 2012;Nollet and Pattyn, 2014;Xhignesse and Verbist, 2019;Vangeel et al, 2020). Nevertheless, within (and outside) the European Union, various MID systems are implemented.…”

Section: Introductionmentioning

confidence: 99%

The influence of a mortgage interest deduction on house prices: evidence across tax systems in Europe

Vangeel

Defau

Moor

2021

The European Journal of Finance

Self Cite

View full text Add to dashboard Cite

show abstract

The influence of a mortgage interest and capital deduction policy on house prices

Cited by 7 publications

References 19 publications

House price dynamics in Iberian Metropolitan Statistical Areas: slope heterogeneity, cross-sectional dependence and elasticities

House price dynamics in Iberian Metropolitan Statistical Areas: slope heterogeneity, cross-sectional dependence and elasticities

Housing prices in emerging countries during COVID-19: evidence from Turkey

The influence of a mortgage interest deduction on house prices: evidence across tax systems in Europe

Contact Info

Product

Resources

About