Sunday, November 2, 2014

House Prices Since 1870

From Katharina Knoll, Doctoral Candidate in Economics/Economic History, Free University of Berlin, Moritz Schularick, Professor of Economics, University of Bonn and CEPR Research Fellow, and Thomas Steger, Professor of Economics, Leipzig University:

In our new paper (Knoll et al. 2014) we turn to economic history to fill this void. Based on extensive historical research, we present new historical house price indices for 14 advanced economies since 1870. Houses are heterogeneous assets, and great care is needed when combining data from a variety of sources in order to construct plausible long-run indices that account for quality improvements, shifts in the composition of the type of houses, and their location... 
While construction costs have flat-lined in the past four decades, sharp increases in residential land prices have driven up international house prices. Our decomposition suggests that up to 80% of the increase in house prices between 1950 and 2012 can be attributed to land price appreciation alone...

The pronounced increase in residential land prices in recent decades contrasts with the earlier period. During the first half of the 20th century, residential land prices remained constant in advanced economies despite substantial population and income growth.

(via VoxEU)

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