For nearly all households, buying or selling of a house or an apartment is the most important and most complicated decision they can make. The considerably intensive fluctuations of the value of these assets have direct consequences for the behaviour of the household on the product and labour markets, but also for the capacity utilisation in the construction sector and for the general business cycle. This is especially true because fluctuations on the real estate or housing markets and the general business cycle can mutually strengthen each other. Heavy fluctuations in income and employment are contradictory to the aim of stabilising the whole economic process. Therefore, the phenomenon to be analysed in this project is also of macroeconomic and of political relevance.
It is the target of this research project to analyse more precisely the causes and the transfer mechanisms of the fluctuations on the real estate markets for houses and apartments. Appropriate methodological approaches are used to explain (better) and to test empirically the large volatility of house prices and transaction volumes.
The analytical basis for the research project is a dynamic theory of the real estate or housing markets developed in recent years by Ortalo-Magné and Rady (publications in 1998 and 1999) in which the typical behaviour of households in the different phases of the life cycle (and not only an average household) is examined. According to this microeconomic theory, there is a strong correlation between the income level, on one hand, and the real estate or house prices and the transaction volumes, on the other. Including further variables (e.g. credit constraints, income uncertainty) as well as the supply side of the construction or house building markets, hypotheses concerning the macroeconomic fluctuations are to be formulated and tested empirically, and proposals for policy activities are to be offered.
For Germany, official statistics with data for real estate or house prices and transaction volumes with houses and apartments are not available. Therefore we will have to collect these data for Germany and, if possible, for single Bundesländer (esp. Bavaria), in adequate quality from other sources, e.g. associations of real estate brokers and banks or private research and consulting institutes. We will have to refer to panel data for the income of households in the different phases of their life cycle, and information regarding the (change of) government interventions (e.g. credit constraints, but also social housing programs and promoting regulations) will have to be collected from ministries and banking associations.
The outlined methodological approach has been tested empirically with good results with US and British data; there are adequate data series available for further countries (e.g. Finland, Sweden and Spain, but also Australia and Japan), which should be used for empirical tests of the hypotheses. Results for Germany or Bavaria can only be submitted after having finished the large-scale work for the assembly of the data in good quality and in appropriate time series.
Fluktuationen des Wohnimmobilienmarktes, Sven Rady, Volker Rußig, ifo Forschungsbericht No 23, Munich, 2004.
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