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Housing investment in Finland

Author

Listed:
  • Kari Takala

    (University of Helsinki)

  • Matti Tuomala

    (University of Helsinki)

Abstract

The high volatility of both housing investment and housing prices has raised questions about the determinants of housing investment in Finland. In this paper we estimate investment equations for the period 1972 -1987. The exceptional durability of houses makes housing investment sensitive to interest rates as well as to changes in the liquidity constraints due to money market liberalization during the 1980's. Here, we confirm the applicability of Tobin's q theory of investment as an explanation for housing investment. Therefore housing investment can be successfully and sufficiently explained with the ratio of nominal housing prices to their construction costs. However, we observed structural changes in the model of housing investment and the q theory gives a better description for supply of houses in the latter half of the estimation period 1980-87.

Suggested Citation

  • Kari Takala & Matti Tuomala, 1990. "Housing investment in Finland," Finnish Economic Papers, Finnish Economic Association, vol. 3(1), pages 41-53, Spring.
    • Handle: RePEc:fep:journl:v:3:y:1990:i:1:p:41-53
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    File URL: http://taloustieteellinenyhdistys.fi/images/stories/fep/f1990_1d.pdf
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    References listed on IDEAS

    as
    1. J. S. S. Edwards & M. J. Keen, 1985. "Taxes, Investment and Q," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 52(4), pages 665-679.
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    Cited by:

    1. Takala, Kari, 1995. "The interest rate sensitivity of output in Finland," Bank of Finland Research Discussion Papers 11/1995, Bank of Finland.
    2. Özge Öner, 2017. "Retail city: the relationship between place attractiveness and accessibility to shops," Spatial Economic Analysis, Taylor & Francis Journals, vol. 12(1), pages 72-91, January.
    3. Kari Takala & Pekka Pere, 1991. "Testing the cointegration of house and stock prices in Finland," Finnish Economic Papers, Finnish Economic Association, vol. 4(1), pages 33-51, Spring.
    4. Piotr Lis, 2015. "Relationships between the finance system and housing markets," Working papers wpaper99, Financialisation, Economy, Society & Sustainable Development (FESSUD) Project.
    5. Takala, Kari, 1995. "The interest rate sensitivity of output in Finland," Research Discussion Papers 11/1995, Bank of Finland.
    6. repec:zbw:bofrdp:2017_026 is not listed on IDEAS
    7. repec:zbw:bofrdp:1995_011 is not listed on IDEAS
    8. Verona, Fabio, 2017. "Q, investment, and the financial cycle," Research Discussion Papers 26/2017, Bank of Finland.

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