Border Effects in House Prices

43 Pages Posted: 11 Feb 2015

See all articles by Martin Micheli

Martin Micheli

Rhine-Westphalia Institute for Economic Research (RWI-Essen)

Jan Rouwendal

VU University Amsterdam - Department of Spatial Economics; Tinbergen Institute

Jasper Dekkers

Vrije Universiteit Amsterdam, School of Business and Economics

Date Written: October 9, 2014

Abstract

We estimate the effect of the Dutch-German border on house prices. In the last 40 years the development of house prices in the Netherlands and Germany has been substantially different. While the Netherlands have been hit by two real estate cycles, prices in Germany have been extraordinary stable. We develop a model for studying house prices and the impact of the border. Then we study the development of Dutch house prices close to the German border in the period 1985-2013. Next, combining German and Dutch real estate datasets, we study the jump in the housing price occurring at the border. Using different estimation strategies, we find that ask prices of comparable housing drop by about 16% when one crosses the Dutch-German border. Given that price discounts from the last observed asking price are substantially larger in Germany, we interpret our findings as indicating the willingness of Dutch households to pay up to 26% higher house prices to live among the Dutch.

Keywords: House prices; European integration; border effects

JEL Classification: R31, F15, R21

Suggested Citation

Micheli, Martin and Rouwendal, Jan and Dekkers, Jasper, Border Effects in House Prices (October 9, 2014). Ruhr Economic Paper No. 511, Available at SSRN: https://ssrn.com/abstract=2562365 or http://dx.doi.org/10.2139/ssrn.2562365

Martin Micheli (Contact Author)

Rhine-Westphalia Institute for Economic Research (RWI-Essen) ( email )

Hohenzollernstr. 1-3
Essen, 45128
Germany

Jan Rouwendal

VU University Amsterdam - Department of Spatial Economics ( email )

De Boelelaan 1105
1081HV Amsterdam
Netherlands

Tinbergen Institute ( email )

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

Jasper Dekkers

Vrije Universiteit Amsterdam, School of Business and Economics ( email )

De Boelelaan 1105
Amsterdam, 1081HV
Netherlands

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