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No Price Like Home: Global House Prices, 1870-2012

158 Pages Posted: 30 Sep 2014  

Katharina Knoll

Free University of Berlin (FUB) - Division of Economics

Moritz Schularick

University of Bonn - Department of Economics; Centre for Economic Policy Research (CEPR)

Thomas Michael Steger

University of Leipzig/Institute for Theoretical Economics/Macroeconomics; CESifo (Center for Economic Studies and Ifo Institute)

Multiple version iconThere are 2 versions of this paper

Date Written: September 2014

Abstract

How have house prices evolved in the long-run? This paper presents annual house price indices for 14 advanced economies since 1870. Based on extensive data collection, we are able to show for the first time that house prices in most industrial economies stayed constant in real terms from the 19th to the mid-20th century, but rose sharply in recent decades. Land prices, not construction costs, hold the key to understanding the trajectory of house prices in the long-run. Residential land prices have surged in the second half of the 20th century, but did not increase meaningfully before. We argue that before World War II dramatic reductions in transport costs expanded the supply of land and suppressed land prices. Since the mid-20th century, comparably large land-augmenting reductions in transport costs no longer occurred. Increased regulations on land use further inhibited the utilization of additional land, while rising expenditure shares for housing services increased demand.

Keywords: house prices, land prices, neoclassical theory, transportation costs

JEL Classification: N10, O10, R30, R40

Suggested Citation

Knoll, Katharina and Schularick, Moritz and Steger, Thomas Michael, No Price Like Home: Global House Prices, 1870-2012 (September 2014). CEPR Discussion Paper No. DP10166. Available at SSRN: https://ssrn.com/abstract=2503396

Katharina Knoll (Contact Author)

Free University of Berlin (FUB) - Division of Economics ( email )

Boltzmannstr. 20
Berlin 14195, 14195
GERMANY

Moritz Schularick

University of Bonn - Department of Economics ( email )

Bonn
Germany

Centre for Economic Policy Research (CEPR)

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

Thomas Michael Steger

University of Leipzig/Institute for Theoretical Economics/Macroeconomics ( email )

Grimmaische Str. 12
D-04109 Leipzig
Germany

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

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