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Determinants of housing prices from an urban economic point of view: evidence from Hungary

Norbert Czinkan (Compass Lexecon, Madrid, Spain)
Áron Horváth (Eltinga Centre For Real Estate Research, Budapest, Hungary and Department of Economics, Eötvövs Loránd University, Budapest, Hungary)

Journal of European Real Estate Research

ISSN: 1753-9269

Article publication date: 30 January 2019

Issue publication date: 23 April 2019

349

Abstract

Purpose

The purpose of the paper is to investigate a cross section of Hungarian settlement-level unit housing prices with a special emphasis on measuring the effect of population and its growth, along with accessibility to the centre of an aggregated spatial unit such as a micro-region, county or region, for the period of 2001-2011.

Design/methodology/approach

The analysis uses cross-sectional ordinary least squares techniques with Moulton-corrected standard errors. The estimation is guided by the implications of a simplified monocentric urbanized area framework following the model of DiPasquale and Wheaton (1996), and the econometric model is augmented with population growth rate at the settlement level to bridge the theory explaining rents and data base containing prices instead.

Findings

The location is a key factor in determining housing prices: living 10 min further from the centre results in 11 per cent cheaper housing. When estimating bid-rent curves, results show that it is crucial to control for city size and the income effect. The elasticity of housing price with respect to city size is 0.09 according to our preferred model. Population growth has an asymmetric impact on housing prices: municipalities with positive expected population growth have higher prices today.

Practical implications

Estimating the quantitative relationship between commuting time and housing price is crucial for a cautious infrastructure development. The benefits of improved roads and faster access could be capitalized in appreciating the housing stock. Estimating the slope of the bid-rent curve is one possible ex ante quantification of the benefits of a public development.

Originality/value

One contribution of this research is providing empirical evidence to surprisingly limited applied work in the field of (monocentric) urban models using data from the CEE region. Second, to the best of the authors’ knowledge, this is the first study to investigate Hungarian settlement-level unit prices from an urban economic point of view.

Keywords

Acknowledgements

The authors are especially grateful to Zoltán Sápi for his excellent help with data collection. This draft has benefited from helpful comments and suggestions, for which the authors would like to thank Lola Collado. The authors would also like to thank the many seminar participants at the University of Alicante and at the AREUEA conference. All mistakes and omissions remain the authors’ own.

Citation

Czinkan, N. and Horváth, Á. (2019), "Determinants of housing prices from an urban economic point of view: evidence from Hungary", Journal of European Real Estate Research, Vol. 12 No. 1, pp. 2-31. https://doi.org/10.1108/JERER-10-2017-0041

Publisher

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Emerald Publishing Limited

Copyright © 2019, Emerald Publishing Limited

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