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Discussion Paper Details

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Title: The effect of self-financed property buyers on local house prices

Author(s): Andreas M Fischer and Lucca Zachmann

Publication Date: April 2020

Keyword(s): macro-prudential regulation, self-financed investors and zero lower bound

Programme Area(s): Monetary Economics and Fluctuations

Abstract: This paper tests the hypothesis whether self-financed property buyers, such as insurance and pension funds, have a larger effect on local house prices than bank-financed property buyers, such as homeowners. Self-financed property buyers of new residential housing are not dependent on mortgage credit and operate independently of the macro-prudential environment. This is not so for bank-financed property buyers. We examine the response of Swiss house prices to new housing investments by self- and bank-financed property buyers at the municipality level between 2008 and 2015: a period when interest rates were at the zero lower bound and macro-prudential regulation became more restrictive. Despite being a small investor class for new residential housing, self-financed property buyers have a disproportionate effect on local house prices.

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Bibliographic Reference

Fischer, A and Zachmann, L. 2020. 'The effect of self-financed property buyers on local house prices'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=14632