Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/130474 
Year of Publication: 
2016
Series/Report no.: 
CESifo Working Paper No. 5844
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
This paper provides a novel macroeconomic model that is specifically designed to investigate the evolution of housing wealth. To capture the importance of land as an input factor for housing production and for the evolution of wealth in a growing economy, the analysis builds on three premises: (1) the overall land endowment is fixed; (2) the production of new houses requires land as an essential input, whereas replacement investment does not; (3) land employed for real estate development must be permanently withdrawn from alternative uses. The calibrated model replicates the historical evolution of housing wealth after Word War II remarkably accurately and accounts for the close connection of house prices to land prices in the data. It suggests a considerable further increase in housing wealth, relative to income, that is associated with a future surge in land prices and house prices. The model also provides new insights into the dynamics of non-residential wealth.
Subjects: 
wealth-to-income ratios
housing wealth
non-residential wealth
house prices
land prices
JEL: 
E10
E20
O40
Document Type: 
Working Paper
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