Regional Supply and Demand Fundamentals in the German Housing Price Boom

authored by

Lars Brausewetter, Stephan L. Thomsen, Johannes Trunzer

Abstract

Over the last decade, German housing prices have increased unprecedentedly. Drawing on quality-Adjusted housing price data at the district level, we show that regional fundamentals explain up to two-Thirds of between-region and 77 to 87 percent of within-region variation in price growth. Price increases were driven mainly by co-movements in local demand fundamentals, notably population density and skill level. However, we further reveal systematic variation unrelated to fundamentals: overvaluation of top 7 cities, path dependency, and spatial spillovers. We infer that speculation, investor preference for liquid markets, and bounded rationality contributed substantially to the recent housing price boom in Germany.

Organisation(s)

Institute of Economic Policy

Type

Article

Journal

German economic review

ISSN

1465-6485

Publication date

13.12.2023

Publication status

E-pub ahead of print

Peer reviewed

Yes

ASJC Scopus subject areas

Economics and Econometrics

Sustainable Development Goals

SDG 11 - Sustainable Cities and Communities

Electronic version(s)

https://doi.org/10.1515/ger-2023-0063 (Access: Closed)