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The influence of a mortgage interest and capital deduction policy on house prices: A regional study for different housing types in Belgium

Wouter Vangeel (Faculty of Social Sciences and Solvay Business School, Vrije Universiteit Brussels, Brussels, Belgium)
Laurens Defau (Faculty of Social Sciences and Solvay Business School, Vrije Universiteit Brussels, Brussels, Belgium) (Research Foundation ‐ Flanders (FWO), Brussels, Belgium)
Lieven De Moor (Faculty of Social Sciences and Solvay Business School, Vrije Universiteit Brussels, Brussels, Belgium)

Journal of Property Investment & Finance

ISSN: 1463-578X

Article publication date: 30 March 2020

Issue publication date: 30 October 2020

459

Abstract

Purpose

Since 2005, Belgian housing prices have strongly increased. As the timing coincides with the implementation of a new fiscal package in order to stimulate homeownership, our study attempts to provide an understanding whether the mortgage interest and capital deduction (MICPD) policy has had the side-effect of increasing housing prices while, at the same time, controlling for key housing price determinants.

Design/methodology/approach

A fixed-effects regression model is used on a panel dataset of the three Belgian regions over the period 1995–2015.

Findings

Estimations are carried out separately for different house types, being useful as our empirical analysis ascertains a significant price-increasing effect for ordinary houses and apartments but a significant price-reducing effect for villas. In addition, we find, among other things, that interest rates' influence has been less substantial than commonly thought.

Originality/value

These results are relevant for all governments willing to stimulate homeownership through fiscal stimuli.

Keywords

Acknowledgements

This work was supported by the Fonds Wetenschappelijk Onderzoek (1102619N)

Citation

Vangeel, W., Defau, L. and De Moor, L. (2020), "The influence of a mortgage interest and capital deduction policy on house prices: A regional study for different housing types in Belgium", Journal of Property Investment & Finance, Vol. 38 No. 6, pp. 563-577. https://doi.org/10.1108/JPIF-08-2019-0102

Publisher

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Emerald Publishing Limited

Copyright © 2020, Emerald Publishing Limited

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