Explaining the Spatial Variation in Housing Prices: An Economic Geography Approach

23 Pages Posted: 28 Nov 2006

See all articles by Karolien De Bruyne

Karolien De Bruyne

KU Leuven - Center for Economic Studies

Jan Van Hove

KU Leuven - Center for Economic Studies

Date Written: September 2006

Abstract

Housing prices vary geographically, even between municipalities. Local differences can be attributed to differences in incomes, demographic effects and real estate characteristics. This paper argues that one should additionally take into account the geographical location of municipalities. In particular, housing prices are affected by distance and travel-time to important economic centers offering jobs and extensive services. Following the economic geography literature, we develop a model showing the impact of geographical barriers on housing prices. We estimate this model on municipality-level housing prices for all 589 Belgian municipalities in 2001. We also differentiate between the two main regions of Belgium (Flanders and Wallonia) as both regions are characterized by political, economic and geographical differences. We distinguish between the attractive forces exercised by both the capital city Brussels and other regional clusters. Our empirical results confirm the expectations. Geographical barriers have significantly negative effects on housing prices. Nevertheless we find important differences between the regions and the means of transport considered.

Suggested Citation

De Bruyne, Karolien and Van Hove, Jan, Explaining the Spatial Variation in Housing Prices: An Economic Geography Approach (September 2006). Available at SSRN: https://ssrn.com/abstract=947671 or http://dx.doi.org/10.2139/ssrn.947671

Karolien De Bruyne (Contact Author)

KU Leuven - Center for Economic Studies ( email )

Naamsestraat 69
Leuven, B-3000
Belgium

Jan Van Hove

KU Leuven - Center for Economic Studies ( email )

Naamsestraat 69
Leuven, B-3000
Belgium

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