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An Analysis of the Income and Price Elasticity of Demand for Housing in View of Price Dynamics on the Residential Property Market

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  • Brzezicka Justyna

    (Department of Spatial Analysis and the Real Estate Market, Faculty of Geoengineering, University of Warmia and Mazury in Olsztyn)

  • Kobylińska Katarzyna

    (Department of Spatial Analysis and the Real Estate Market, Faculty of Geoengineering, University of Warmia and Mazury in Olsztyn)

Abstract

In both the global and the domestic approach, the real estate market is a multifaceted domain of study, constituting a specific and imperfect system. Researchers have to rely on increasingly advanced analytical tools to capture the structural complexity of real estate markets. Real estate prices are influenced by contradictory behaviors of market participants. This observation prompted the authors to analyze the income and price elasticity of demand for housing by calculating elasticity coefficients in view of changes in housing prices and the Veblen effect. This problem was analyzed based on a review of the literature and the results of an experiment. The results of the current study can be used to confirm the presence of the Veblen effect on the housing market based on the adopted criteria. The coefficients of price and income elasticity of demand for housing were calculated in view of the price dynamics on the real estate market to paint a more complete picture of reality and explain market processes.

Suggested Citation

  • Brzezicka Justyna & Kobylińska Katarzyna, 2021. "An Analysis of the Income and Price Elasticity of Demand for Housing in View of Price Dynamics on the Residential Property Market," Real Estate Management and Valuation, Sciendo, vol. 29(4), pages 97-110, December.
    • Handle: RePEc:vrs:remava:v:29:y:2021:i:4:p:97-110:n:5
    DOI: 10.2478/remav-2021-0032
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    References listed on IDEAS

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    1. Harmon, Oskar R., 1988. "The income elasticity of demand for single-family owner-occupied housing: An empirical reconciliation," Journal of Urban Economics, Elsevier, vol. 24(2), pages 173-185, September.
    2. Drapikovskyi, Oleksandr & Ivanova, Iryna & Renigier-Biłozor, Małgorzata & Źróbek, Sabina, 2020. "How to assess the impact of hope on a change in the use of land on market value?," Land Use Policy, Elsevier, vol. 97(C).
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    5. Jason Beck & Frank Scott & Aaron Yelowitz, 2012. "Concentration and Market Structure in Local Real Estate Markets," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 40(3), pages 422-460, September.
    6. Hansen, Julia L. & Formby, John P. & Smith, W. James, 1998. "Estimating the Income Elasticity of Demand for Housing: A Comparison of Traditional and Lorenz-Concentration Curve Methodologies," Journal of Housing Economics, Elsevier, vol. 7(4), pages 328-342, December.
    7. Mayo, Stephen K., 1981. "Theory and estimation in the economics of housing demand," Journal of Urban Economics, Elsevier, vol. 10(1), pages 95-116, July.
    8. Hansen, Julia L. & Formby, John P. & Smith, W. James, 1996. "The Income Elasticity of Demand for Housing: Evidence from Concentration Curves," Journal of Urban Economics, Elsevier, vol. 39(2), pages 173-192, March.
    9. Bagwell, Laurie Simon & Bernheim, B Douglas, 1996. "Veblen Effects in a Theory of Conspicuous Consumption," American Economic Review, American Economic Association, vol. 86(3), pages 349-373, June.
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    1. Calabrese, Stephen, 2024. "Household mobility and the political economy and welfare effects of local tax limits," Journal of Urban Economics, Elsevier, vol. 142(C).

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    More about this item

    Keywords

    income elasticity of demand for housing; price elasticity of demand for housing; Veblen effect; luxury goods;
    All these keywords.

    JEL classification:

    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D19 - Microeconomics - - Household Behavior - - - Other
    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand

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