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The effect of land lease on house prices

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  • Gautier, Pieter A.
  • Vuuren, Aico van

Abstract

In Amsterdam, houses located on private land and houses with various land-lease contracts coexist. This paper estimates the market valuation of future land-lease payments on the house price. This is useful for cities (like Amsterdam) that want to offer infinite lease terms, and can be also used to estimate long-run discount rates. We investigate the impact of: (i) the number of years that the land lease has been paid in advance and (ii) the amount that must be paid up front. Depending on the specification, houses on privately owned land are, on average, 11–13% more expensive than observably equivalent houses with a (non-prepaid) land-lease contract. Each year that no land lease has to be paid increases the price of a house by approximately 0.2%. Those findings correspond to a discount rate of 4% per year.

Suggested Citation

  • Gautier, Pieter A. & Vuuren, Aico van, 2019. "The effect of land lease on house prices," Journal of Housing Economics, Elsevier, vol. 46(C).
    • Handle: RePEc:eee:jhouse:v:46:y:2019:i:c:s1051137719300853
    DOI: 10.1016/j.jhe.2019.101646
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    Cited by:

    1. Fan, Jianshuang & Zhou, Lin & Yu, Xiaofen & Zhang, Yanjiang, 2021. "Impact of land quota and land supply structure on China’s housing prices: Quasi-natural experiment based on land quota policy adjustment," Land Use Policy, Elsevier, vol. 106(C).
    2. Korthals Altes, Willem K., 2019. "Planning initiative: Promoting development by the use of options in Amsterdam," Land Use Policy, Elsevier, vol. 83(C), pages 13-21.

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    More about this item

    Keywords

    House prices; Land lease;

    JEL classification:

    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General
    • R38 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Government Policy

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