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Rent Deregulation, Tenure Choice, and Real Estate Price Expectations

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  • Ashot Tsharakyan
  • Petr Zemcik

Abstract

We study a natural experiment in the Czech Republic where the maximum regulated rent appreciation has depended explicitly on the price of real estate since 2007. We track the tenure choice of households from consumption surveys for subsequent years. Rent deregulation makes households in regulated apartments more likely to own real estate while the opposite is true for other renters and owners. The net present value of buying property vs renting is an increasing function of the real estate price appreciation for renters in regulated apartments. We use their tenure choice to generate the distribution of property price expectations.

Suggested Citation

  • Ashot Tsharakyan & Petr Zemcik, 2011. "Rent Deregulation, Tenure Choice, and Real Estate Price Expectations," CERGE-EI Working Papers wp430, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
    • Handle: RePEc:cer:papers:wp430
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    File URL: http://www.cerge-ei.cz/pdf/wp/Wp430.pdf
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    References listed on IDEAS

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    5. Martin Lux, 2001. "Social Housing In The Czech Republic, Poland And Slovakia," International Journal of Housing Policy, Taylor & Francis Journals, vol. 1(2), pages 189-209.
    6. Vyacheslav Mikhed & Petr Zemčík, 2009. "Testing for Bubbles in Housing Markets: A Panel Data Approach," The Journal of Real Estate Finance and Economics, Springer, vol. 38(4), pages 366-386, May.
    7. Roistacher, Elizabeth A., 1992. "Rent regulation in New York City: Simulating decontrol options," Journal of Housing Economics, Elsevier, vol. 2(2), pages 107-138, June.
    8. Clayton, Jim, 1997. "Are Housing Price Cycles Driven by Irrational Expectations?," The Journal of Real Estate Finance and Economics, Springer, vol. 14(3), pages 341-363, May.
    9. Martin Lux, 2001. "Social Housing In The Czech Republic, Poland And Slovakia," European Journal of Housing Policy, Taylor and Francis Journals, vol. 1(2), pages 189-209.
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    Cited by:

    1. Martin Lux & Petr Gibas & Irena Boumová & Martin Hájek & Petr Sunega, 2017. "Reasoning behind choices: rationality and social norms in the housing market behaviour of first-time buyers in the Czech Republic," Housing Studies, Taylor & Francis Journals, vol. 32(4), pages 517-539, May.
    2. Michael Berlemann & Julia Freese, 2013. "Monetary policy and real estate prices: a disaggregated analysis for Switzerland," International Economics and Economic Policy, Springer, vol. 10(4), pages 469-490, December.

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    More about this item

    Keywords

    Czech Republic; expectations; rent regulation and deregulation; real estate prices; tenure choice;
    All these keywords.

    JEL classification:

    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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