The Financial Crisis and Diverging House Prices: Evidence from the Copenhagen Metropolitan Area

Tinbergen Institute Discussion Paper 17084

38 Pages Posted: 25 Sep 2017

See all articles by Ismir Mulalic

Ismir Mulalic

Technical University of Denmark

Holger Rasmussen

Krak Institute for Urban Economic Research

Jan Rouwendal

VU University Amsterdam - Department of Spatial Economics; Tinbergen Institute

Hans Henrik Woltmann

Krak Institute for Urban Economic Research

Date Written: August 24, 2017

Abstract

This paper investigates the development of house prices in Copenhagen in the period 1994-2013, while paying special attention to the heterogeneous impact of the boom and bust periods along the dimensions of housing type (single vs multifamily housing), geography and quality. To allow for price developments that can differ by quality, we use a recently developed generalization of the conventional Muth model that assumes a constant unit price across the quality spectrum. It allows us to separately consider the development of house prices and quality in Copenhagen neighbourhoods. Moreover, we investigate the validity of the common assumption of a constant unit price and reject it decisively. We use detailed housing transaction data for the greater Copenhagen area. We show that the housing boom of the 2000’s and the bust that followed hit the lowest quality segments significantly harder than the high quality segments of the housing market.

Keywords: housing price, housing quality, housing price index

JEL Classification: D40, L85, R21, R31

Suggested Citation

Mulalic, Ismir and Rasmussen, Holger and Rouwendal, Jan and Woltmann, Hans Henrik, The Financial Crisis and Diverging House Prices: Evidence from the Copenhagen Metropolitan Area (August 24, 2017). Tinbergen Institute Discussion Paper 17084, Available at SSRN: https://ssrn.com/abstract=3041272 or http://dx.doi.org/10.2139/ssrn.3041272

Ismir Mulalic (Contact Author)

Technical University of Denmark ( email )

Anker Engelunds Vej 1
Building 101A
Lyngby, 2800
Denmark

Holger Rasmussen

Krak Institute for Urban Economic Research ( email )

Ved Stranden 16
Copenhagen, Kbh K 1061
Denmark

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

Hans Henrik Woltmann

Krak Institute for Urban Economic Research ( email )

Ved Stranden 16
Copenhagen, Kbh K 1061
Denmark

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