The price responsiveness of housing supply in OECD countries

•Results suggest that housing responsiveness varies substantially across countries.•Housing supply is relatively flexible in North America and some Nordic countries.•Housing supply is more rigid in continental Europe and in the United Kingdom.•The supply responsiveness depends on geographical and ur...

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Bibliographic Details
Published in:Journal of housing economics 2013-09, Vol.22 (3), p.231-249
Main Authors: Caldera, Aida, Johansson, Åsa
Format: Article
Language:English
Subjects:
Estimation
Europe
H11
House prices
Housing market
Housing markets
Housing prices
Housing supply
Land use
Land use regulation
Nordic countries
OECD
R21
R31
R38
United Kingdom
Urban areas
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Summary:•Results suggest that housing responsiveness varies substantially across countries.•Housing supply is relatively flexible in North America and some Nordic countries.•Housing supply is more rigid in continental Europe and in the United Kingdom.•The supply responsiveness depends on geographical and urban characteristics.•Supply responsiveness also depends on land use and planning regulations. The responsiveness of housing supply to changes in prices bears important implications for the evolution of housing prices and the speed of adjustment of housing markets. Based on a stock-flow model of the housing market estimated within an error correction framework, this paper estimates the long-run price elasticity of new housing supply in 21 OECD countries. Estimates suggest that the responsiveness of housing supply to price changes varies substantially across countries. It is relatively more flexible in North America and some Nordic countries, while it is more rigid in continental European countries and in the United Kingdom. The responsiveness of housing supply depends not only on national geographical and urban characteristics but also on policies, such as land use and planning regulations.
ISSN:1051-1377
1096-0791
DOI:10.1016/j.jhe.2013.05.002