Immigration, Real Estate Prices and the Consumption Decisions of Native Households

Item Type Monograph (Working Paper)
Abstract

Since house prices govern the consumption decisions of renters and owners alike, changing house prices can have far-reaching macroeconomic consequences. We analyze how the disposable income and consumption decisions of households are affected by exogenous house price changes in Switzerland. We look at consumption of both housing and non-durable goods to establish a comprehensive picture. We ensure that our house price variation is exogenous by instrumenting house prices with origin-shift immigration. Our unique dataset includes information on every immigrant that entered Switzerland between 1990 and 2013, house price data for every community, and detailed survey data for over 5000 households. We can show three things. Firstly, different types of immigrants influence house prices to different degrees. This finding allows us to structure a valid instrument while also contributing to an ongoing European discussion over the effects of immigration. Secondly, rising house prices reduce the disposable income of renters. This is particularly pronounced for renters who are forced to relocate in times of rising prices. We find, therefore, that renters consume less while owners do not necessarily consume more. This is different from the US/UK context and may reflect the inability of households to extract home equity in central Europe. Thirdly, households transition to ownership less frequently or move away more often following an exogenous price increase. We add novel insights on household consumption and tenure-/location choice in response to exogenous changes in the cost of housing.

Authors Adams, Zeno & Blickle, Kristian
Language English
Subjects finance
HSG Classification contribution to scientific community
HSG Profile Area None
Date 1 July 2016
Publisher SoF - HSG
Place of Publication St. Gallen
Series Name School of Finance Working Paper Series
Volume 2016/15
Number 15
Number of Pages 53
Depositing User Geraldine Frei-Böbel
Date Deposited 18 Aug 2016 14:30
Last Modified 17 Jan 2018 15:48
URI: https://www.alexandria.unisg.ch/publications/249047

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Citation

Adams, Zeno & Blickle, Kristian: Immigration, Real Estate Prices and the Consumption Decisions of Native Households. School of Finance Working Paper Series, 2016, 15.

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https://www.alexandria.unisg.ch/id/eprint/249047
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