House prices, housing development costs, and the supply of new single-family housing in German counties and cities
||Oliver Wolfgang Lerbs
||House prices, housing development costs, and the supply of new single-family housing in German counties and cities
||19th Annual European Real Estate Society Conference in Edinburgh, Scotland
||This paper employs panel data on 413 counties and cities from 2004 to 2009 to investigate the local supply of new single-family housing in Germany. New single-family housing supply in local housing markets is measured by the number of new construction permits in relation to the local single-family housing stock. Local variation in this supply indicator is subsequently modeled as a function of local variation in both levels and recent changes in existing single-family home prices and new housing development costs, with the latter including local costs of vacant land and local costs related to housing construction. Fixed effects regression results suggest that single-family housing permit rates in a location are positively associated with current prices of single-family home prices and recent increases in housing development costs. Higher current levels of replacement costs, by contrast, turn out to dampen new local construction activity. Augmenting the new supply equation by further indicators of single-family housing demand in a location does not change any of these basic insights, while time effects suggest that nationwide factors exerted a considerable influence on local single-family housing permit activity during the time period analyzed. The average local price elasticity of new single-family housing permits is considerably less than one, supporting recently published estimates based on national time-series data. As a surprising result, it emerges that German core cities show higher average price elasticities than rural places.
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||PhD Session 1B
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