Is Urban Land Price Adjustment More Sluggish than Housing Price Adjustment? Empirical Evidence

Elias Oikarinen*

*Corresponding author for this work

Research output: Contribution to journalArticleScientificpeer-review

Abstract

This article hypothesises that, due to factors such as thin trading and lack of publicly available data on transactions in the land market, urban land prices react more sluggishly to shocks in market fundamentals than housing prices do. Based on a vector error-correction model utilising quarterly data for the Helsinki Metropolitan Area in Finland over 1988Q1-2008Q2, the empirical analysis provides support for this hypothesis. In particular, the results suggest that new information regarding the market fundamentals is more rapidly reflected in housing prices than in land prices. Nevertheless, it is the housing price level, instead of land prices, that adjusts towards a cointegrating long-run equilibrium between housing prices, land prices and construction costs.

Original languageEnglish
Pages (from-to)1686-1706
Number of pages21
JournalUrban Studies
Volume51
Issue number8
DOIs
Publication statusPublished - Jun 2014
MoE publication typeA1 Journal article-refereed

Keywords

  • housing price
  • land price
  • dynamics
  • cointegration
  • impulse responses
  • RESIDENTIAL LAND
  • UNCERTAINTY
  • EFFICIENCY
  • MARKETS
  • MODELS

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