Urban housing markets
Housing wealth home buyers’ behaviour
10.00 – 10.30 Booms and busts in house prices at the city
level
– Jeanette Fjære-Lindkjenn
This paper detects booms and busts in house prices at the city level, using predefined censoring rules to document the duration of booms and busts, as well as house price developments over the cycle for fourteen cities in Norway over the period 2003-2019. The findings indicate that there is considerable heterogeneity in housing cycles at the city level. Further, a co-integrated vector error correction model is used to identify the long-run drivers of real house prices in each city. This model indicates that the effect of the user cost to house prices, in which variation is to a large extent driven by mortgage rates, differs greatly among the cities, with the largest effect observed in the capital, Oslo. The long-run effect of disposable income to real house prices is similar across the cities with an elasticity of about 1.5.
Finally, the vector error correction model is applied to construct an
equilibrium house price path and investigate whether large gaps between actual house prices and the equilibrium path can be used as a predictor for turning points in the housing market, from boom to bust or bust to boom.
Jeanette Fjære-Lindkjenn is a PhD candidate at Housing Lab and a member of the Monetary Policy and Financial Stability Committee at Norges Bank. Before joining Housing Lab she worked as a macro-economist at DNB Markets and as an economist at Norges Bank. She obtained her Master in Economics and Econometrics at the University of Oslo in 2014.
10.30 – 11.00 Wealth across generations through the housing market
– Ragnar Juelsrud
Norwegian tax data and a life-cycle model with housing is used to study how wealth transmits across generations through the housing market. After controlling for a rich set of attributes, households with richer parents are 15% more likely to be homeowners at age 30. Moreover, when entering, they have higher leverage and buy homes worth 20% more. Estimates using international stock market returns as a shift-share instrument support a causal impact of parental wealth. Furthermore, this session document that housing outcomes when young are important determinants of midlife wealth. This holds also when using plausibly exogenous variation in home ownership caused by the timing of intra-family deaths. As a result, housing gaps caused purely by parental wealth explain 12% of inter-generational wealth persistence. In terms of mechanisms, parents use home equity withdrawals and transfers, co-purchasing and intra-family house sales at discounted prices to support their offspring. Through the lens of this model, housing choices in response to price expectations stand out as crucial in determining the magnitude of the housing channel of inter-generational wealth persistence.
Ragnar Juelsrud is a Senior Research Economist at Norges Bank Research. His research interests lies in understanding the functioning of credit markets and how macro-prudential and monetary policy affect such markets. Juelsrud has a PhD from BI – Norwegian Business School in 2018.
11.00 – 11.30 Ownership of properties in Dubai
– Bluebery Planterose
This paper analyzes a unique micro-dataset capturing the ownership of about 800,000 properties in Dubai. This dataset is used to document patterns in cross-border real estate investments, a blind spot in the analysis of financial globalization. There are four main findings. First, offshore real estate in Dubai is large: at least $146 billion in foreign wealth is invested in the Dubai property market.
Second, geographical proximity and historic ties are key determinants of foreign investments in Dubai. About 20% of offshore Dubai real estate is owned by investors from India and 10% by investors from the United Kingdom; other large investing countries include Pakistan, Gulf countries, Iran, Canada, Russia, and the United States. These patterns hold when focusing on the most affluent neighborhoods, with the main difference that Indian investments become relatively smaller and Russian investments larger. Third, a number of conflict-ridden countries and autocracies have large holdings in Dubai relative to the size of their economy, equivalent to 5%-10% of their GDP.
This suggests that the official net foreign asset position of a number of low-income economies is significantly under-estimated.
Last, by matching properties owned by Norwegians to administrative tax records in Norway, the probability to own offshore real estate rises with wealth, including within the very top of the wealth distribution. About 70% of Dubai properties owned by Norwegian taxpayers were not reported for tax purposes in 2019. These results suggest that the lack of cross-border exchange of information on real estate ownership is a significant issue for tax enforcement.
Bluebery Planterose is a PhD candidate at the Paris School of Economics and the École Normale Supérieure. He is a researcher at the EU Tax Observatory, as well as a research fellow at the Social Economics Lab at Harvard. Additionally, he is affiliated with the Norwegian University of Life Sciences. Prior to these roles, Planterose worked at the OECD and for the French Treasury in Bangkok.
Bluebery Planterose holds a Master’s degree in Public Administration from LSE and a Master’s degree in Economics and Public Policy from Sciences Po. With an academic background in social sciences and humanities, he is particularly interested in exploring the connections between taxation and inequality.
11.30 – 12.00 Why do housing buyers and sellers sometimes agree to a deal that preempts housing auctions?
– Andreas Eidspjeld Eriksen
In the Norwegian housing market, the norm is that housing is sold at auctions. But while the institutional setting is structured to get auctions, it is not illegal to offer preemptive bids. A small share of transactions is the result of such preemptive bids. In this paper, the interest lies in understanding why preemptive bids are sometimes successful, and who benefits from them. More specifically, why buyers sometimes offer preemptive bids to avoid auctions is investigated, as well as why sellers sometimes accept such bids. A theoretical model of preemptive bidding is supplemented with empirical evidence from a unique dataset of bids from housing auctions.
Andreas Eidspjeld Eriksen is a fourth year Economics PhD student at Housing Lab at OsloMet. Eriksen’s research interests centers around applied/empirical housing economics, especially strategies and behavior of buyers and sellers.