Working Paper: CEPR ID: DP10166
Authors: Katharina Knoll; Moritz Schularick; Thomas Steger
Abstract: How have house prices evolved over the long-run? This paper presents annual house prices for 14 advanced economies since 1870. Based on extensive data collection, we show that real house prices stayed constant from the 19th to the mid-20th century, but rose strongly during the second half of the 20th century. Land prices, not replacement costs, are the key to understanding the trajectory of house prices. Rising land prices explain about 80 percent of the global house price boom that has taken place since World War II. Higher land values have pushed up wealth-to-income ratios in recent decades.
Keywords: house prices; land prices; neoclassical theory; transportation costs
JEL Codes: N10; O10; R30; R40
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| rising land prices (R31) | increase in global house prices (R31) |
| increase in global house prices (R31) | higher wealth-to-income ratios (D31) |
| rising land prices (R31) | increase in inequality (D31) |
| stability of land prices before World War II (N93) | rising land prices after World War II (R21) |