A Housing Portfolio Channel of QE Transmission

Abstract

We document a housing portfolio channel of quantitative easing (QE) transmission exploiting variation in German household data in a difference-in-differences setting around QE adoption in 2015. We find that QE encourages households with larger initial bond positions to rebalance more toward second homes. Rebalancing is especially pronounced among higher-income and church-affiliated households with stronger tax incentives to purchase and rent out properties. We also show that, in regions more exposed to this channel, house prices increase more than rents, and sale listings decrease more than rental ones, suggesting that the rental supply may increase in response to QE.

Keywords: Buy-to-let, Germany, Housing Returns, Housing Tax Regimes, Household Portfolio Rebalancing, Monetary Policy, Rental Yields, Quantitative Easing

JEL Classification: E3, E4, E5, G5, R3