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The Effect of a Second Home Construction Ban on Real Estate Prices

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  • Daniel Steffen

Abstract

In 2012, a drastic regulation prohibiting the construction of holiday and investment homes in touristic municipalities in Switzerland was surprisingly introduced. I investigate the causal effect of such a construction limitation on real estate prices. The regulation does not affect all municipalities, which provides a unique possibility to separate the municipalities into treatment and control groups. I apply the synthetic control method to estimate the causal effect of the regulation. Unlike the classic synthetic control method literature, I deal with multiple heterogeneous treatment units. This allows me to compute statistical significance precisely and construct confidence intervals. I demonstrate a salient drop in real estate prices of between - 10% and -18% three to five years after the intervention. These results are highly significant. However, no effect on prices in the first two years after the intervention is found. The decrease in prices is shown to be caused by indirect channels such as adverse effects on local economies and legal uncertainty.

Suggested Citation

  • Daniel Steffen, 2017. "The Effect of a Second Home Construction Ban on Real Estate Prices," Diskussionsschriften credresearchpaper18, Universitaet Bern, Departement Volkswirtschaft - CRED.
    • Handle: RePEc:rdv:wpaper:credresearchpaper18
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    References listed on IDEAS

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    More about this item

    Keywords

    Second homes; synthetic control; multiple treatment units; land use regulation; house prices;
    All these keywords.

    JEL classification:

    • 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
    • R52 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Land Use and Other Regulations

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