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Institutional investors and house prices

Author

Listed:
  • Bandoni, Emil
  • De Nora, Giorgia
  • Giuzio, Margherita
  • Ryan, Ellen
  • Storz, Manuela

Abstract

Institutional investors, such as investment funds, are playing an increasingly important role in residential real estate markets. This raises the possibility that their actions might drive aggregate market outcomes and may change how and which macrofinancial shocks transmit to house prices. In a Bayesian vector autoregression setting, we show that a demand shock from institutional investors has a positive and persistent effect on aggregate euro area house price growth and mortgage lending volumes. Institutional investors also increase their purchase activity following a loosening of monetary policy. Exploiting regional heterogeneity in eight euro area countries, we show in a panel regression setting that institutional investors weaken the link between house price growth and local economic fundamentals, but strengthen the sensitivity to monetary policy and financial market developments. JEL Classification: R31, E52, G23

Suggested Citation

  • Bandoni, Emil & De Nora, Giorgia & Giuzio, Margherita & Ryan, Ellen & Storz, Manuela, 2025. "Institutional investors and house prices," Working Paper Series 3026, European Central Bank.
    • Handle: RePEc:ecb:ecbwps:20253026
    Note: 3546207
    as

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    File URL: https://www.ecb.europa.eu//pub/pdf/scpwps/ecb.wp3026~8b2199688d.en.pdf
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    More about this item

    Keywords

    financial stability; investment funds; monetary policy; non-bank financial intermediation; real estate;
    All these keywords.

    JEL classification:

    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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