Rent deregulation, tenure choice, and real estate price expectations

Ashot Tsharakyan, Petr Zemcik
Work package: 
WP 6
Publication number: 
01 February 2011

Abstract: We study a natural experiment in the Czech Republic where the maximum regulated rent appreciation has depended explicitly on the price of real estate since 2007. We track the tenure choice of households from consumption surveys for subsequent years. Rent deregulation makes households in regulated apartments more likely to own real estate while the opposite is true for other renters and owners. The net present value of buying property vs. renting is an increasing function of the real estate price appreciation for renters in regulated apartments. We use their tenure choice to generate the distribution of property price expectations.

Key words: Czech Republic; Expectations; Rent regulation and deregulation; Real estate prices; Tenure choice
JEL Classification: C25 - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; R21 - Housing Demand; R31 - Housing Supply and Markets

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