Resource title

House prices and replacement cost: a mMicro-level analysis

Resource image

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Resource description

According to housing investment models, house prices and replacement cost should have an equilibrating relationship. Previous empirical work - mainly based on aggregate-level data - has found only little evidence of such a relationship. By using a unique data set, covering transactions of single-family houses over a 25 years period, we establish strong support for the relationship at the micro level. In the time series context, we find that new house prices and replacement cost align quickly after a shock. In the cross-sectional context, we find prices of old houses and replacement cost are closely related once building depreciation has been taken into account. As to be expected from these results, replacement cost information also proves to be useful for the prediction of future house prices.

Resource author

Rainer Schulz, Axel Werwatz

Resource publisher

Resource publish date

Resource language

eng

Resource content type

text/html

Resource resource URL

http://hdl.handle.net/10419/25255

Resource license

Adapt according to the presented license agreement and reference the original author.