Working Paper: CEPR ID: DP14632
Authors: Andreas M. Fischer; Lucca Zachmann
Abstract: This paper tests the hypothesis whether self-financed property buyers, such as insurance and pension funds, have a larger effect on local house prices than bank-financed property buyers, such as homeowners. Self-financed property buyers of new residential housing are not dependent on mortgage credit and operate independently of the macro-prudential environment. This is not so for bank-financed property buyers. We examine the response of Swiss house prices to new housing investments by self- and bank-financed property buyers at the municipality level between 2008 and 2015: a period when interest rates were at the zero lower bound and macro-prudential regulation became more restrictive. Despite being a small investor class for new residential housing, self-financed property buyers have a disproportionate effect on local house prices.
Keywords: self-financed investors; zero lower bound; macroprudential regulation
JEL Codes: E59; G20; G21; G28
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| self-financed property buyers (G51) | local house prices (R31) |
| CCyB to RWA ratio (E51) | local house prices (R31) |
| self-financed property buyers + CCyB to RWA ratio (G21) | local house prices (R31) |
| bank-financed property buyers (G21) | local house prices (R31) |
| bank-financed property buyers + CCyB to RWA ratio (G21) | local house prices (R31) |