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Real Estate and Construction Sector Dynamics Over the Business Cycle

Research output: Working paper

Published

Standard

Real Estate and Construction Sector Dynamics Over the Business Cycle. / Vasilopoulos, Konstantinos; Tayler, William.

Lancaster : Lancaster University, Department of Economics, 2021. (Economics Working Papers Series).

Research output: Working paper

Harvard

Vasilopoulos, K & Tayler, W 2021 'Real Estate and Construction Sector Dynamics Over the Business Cycle' Economics Working Papers Series, Lancaster University, Department of Economics, Lancaster.

APA

Vasilopoulos, K., & Tayler, W. (2021). Real Estate and Construction Sector Dynamics Over the Business Cycle. (Economics Working Papers Series). Lancaster University, Department of Economics.

Vancouver

Vasilopoulos K, Tayler W. Real Estate and Construction Sector Dynamics Over the Business Cycle. Lancaster: Lancaster University, Department of Economics. 2021 May 31. (Economics Working Papers Series).

Author

Vasilopoulos, Konstantinos ; Tayler, William. / Real Estate and Construction Sector Dynamics Over the Business Cycle. Lancaster : Lancaster University, Department of Economics, 2021. (Economics Working Papers Series).

Bibtex

@techreport{d11eea838d2749e88842357f21697968,
title = "Real Estate and Construction Sector Dynamics Over the Business Cycle",
abstract = "This paper explores the property prices and investment dynamics over the business cycle when there is competition between households and firms for real estate. We introduce a construction sector into an RBC framework, which uses land, capital and labour to produce both commercial and residential real estate. This market structure activates a real estate substitution channel, where an increase in demand for residential real estate also increases the cost of producing commercial structures, which crowds out commercial real estate investment. In general, we find that the residential/commercial land allocation acts as an anchor for the allocation of its real estate investment counterpart; however, there are notable separations, particularly following the financial crisis where there was a simultaneous fall in residential and commercial investment. Our results indicate that whilst residential real estate prices were predominately driven by increases in its demand in the buildup to the financial crisis, the fall in demand for commercial real estate played a significant role in generating price falls for both types of real estate in the aftermath. Furthermore, falls inthe overall supply of real estate played an important role in reducing real estate investment which put upward pressure on prices throughout the past two decades.",
keywords = "Commercial Real Estate, Residential Real Estate, Real Estate Substitution, Land Prices, DSGE Models",
author = "Konstantinos Vasilopoulos and William Tayler",
year = "2021",
month = may,
day = "31",
language = "English",
series = "Economics Working Papers Series",
publisher = "Lancaster University, Department of Economics",
type = "WorkingPaper",
institution = "Lancaster University, Department of Economics",

}

RIS

TY - UNPB

T1 - Real Estate and Construction Sector Dynamics Over the Business Cycle

AU - Vasilopoulos, Konstantinos

AU - Tayler, William

PY - 2021/5/31

Y1 - 2021/5/31

N2 - This paper explores the property prices and investment dynamics over the business cycle when there is competition between households and firms for real estate. We introduce a construction sector into an RBC framework, which uses land, capital and labour to produce both commercial and residential real estate. This market structure activates a real estate substitution channel, where an increase in demand for residential real estate also increases the cost of producing commercial structures, which crowds out commercial real estate investment. In general, we find that the residential/commercial land allocation acts as an anchor for the allocation of its real estate investment counterpart; however, there are notable separations, particularly following the financial crisis where there was a simultaneous fall in residential and commercial investment. Our results indicate that whilst residential real estate prices were predominately driven by increases in its demand in the buildup to the financial crisis, the fall in demand for commercial real estate played a significant role in generating price falls for both types of real estate in the aftermath. Furthermore, falls inthe overall supply of real estate played an important role in reducing real estate investment which put upward pressure on prices throughout the past two decades.

AB - This paper explores the property prices and investment dynamics over the business cycle when there is competition between households and firms for real estate. We introduce a construction sector into an RBC framework, which uses land, capital and labour to produce both commercial and residential real estate. This market structure activates a real estate substitution channel, where an increase in demand for residential real estate also increases the cost of producing commercial structures, which crowds out commercial real estate investment. In general, we find that the residential/commercial land allocation acts as an anchor for the allocation of its real estate investment counterpart; however, there are notable separations, particularly following the financial crisis where there was a simultaneous fall in residential and commercial investment. Our results indicate that whilst residential real estate prices were predominately driven by increases in its demand in the buildup to the financial crisis, the fall in demand for commercial real estate played a significant role in generating price falls for both types of real estate in the aftermath. Furthermore, falls inthe overall supply of real estate played an important role in reducing real estate investment which put upward pressure on prices throughout the past two decades.

KW - Commercial Real Estate

KW - Residential Real Estate

KW - Real Estate Substitution

KW - Land Prices

KW - DSGE Models

M3 - Working paper

T3 - Economics Working Papers Series

BT - Real Estate and Construction Sector Dynamics Over the Business Cycle

PB - Lancaster University, Department of Economics

CY - Lancaster

ER -