Housing Price Movements Lead Land Price Changes

What is it about?

The results of empirical analysis provided in this study suggest that new information regarding the market fundamentals is more rapidly reflected in housing prices than in land prices. That is, housing price movements lead land price movements. The results also indicate that there is a long-term equilibrium relation between housing prices, land prices and construction costs.

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Why is it important?

The empirical findings are of relevance to anyone who is interested in housing and land market dynamics — for instance, to construction companies, real estate brokers, landowners and investors as well as to policy-makers and housing economists. In particular, the estimated models entail predictability implications which affect the optimal behaviour of, for example, construction companies and landowners, and the analysis yields information on the main driving factors behind the urban housing and land market dynamics.