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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. 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.
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    7. Bas van der Klaauw & Udo Kock, 1999. "Evaluating Dutch Housing Market Regulation," Tinbergen Institute Discussion Papers 99-007/3, Tinbergen Institute.
    8. 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.
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    Cited by:

    1. 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.
    2. 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.

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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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