The Effect of a Second Home Construction Ban on Real Estate Prices - Evidence from Switzerland using the Synthetic Control Method

Steffen, Daniel (December 2017). The Effect of a Second Home Construction Ban on Real Estate Prices - Evidence from Switzerland using the Synthetic Control Method (CRED Research Paper 18). Bern: CRED - Center for Regional Economic Development

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In 2012, a drastic regulation prohibiting the construction of holiday and Investment homes in touristic municipalities in Switzerland was surprisingly introduced. I investigate the causal effect of such a construction limitation on real estate prices. The regulation does not affect all municipalities, which provides a unique possibility to separate the municipalities into treatment and control groups. I apply the synthetic control method to estimate the causal effect of the regulation. Unlike the classic synthetic control method literature, I deal with multiple heterogeneous Treatment units. This allows me to compute statistical significance precisely and construct confidence intervals. I demonstrate a salient drop in real estate prices of between -10% and -18% three to five years after the intervention. These results are highly significant. However, no effect on prices in the first two years after the Intervention is found. The decrease in prices is shown to be caused by indirect channels such as adverse effects on local economies and legal uncertainty.

Item Type:

Working Paper

Division/Institute:

03 Faculty of Business, Economics and Social Sciences > Department of Economics
03 Faculty of Business, Economics and Social Sciences > Department of Economics > Institute of Economics > Economic Policy and Regional Economics
03 Faculty of Business, Economics and Social Sciences > Department of Economics > Institute of Economics
11 Centers of Competence > Center for Regional Economic Development (CRED)

UniBE Contributor:

Steffen, Daniel

Subjects:

300 Social sciences, sociology & anthropology > 330 Economics

Series:

CRED Research Paper

Publisher:

CRED - Center for Regional Economic Development

Language:

English

Submitter:

Melanie Moser

Date Deposited:

15 Apr 2020 11:40

Last Modified:

15 Apr 2020 11:40

Uncontrolled Keywords:

Second homes, synthetic control, multiple treatment units, land use regulation, house prices

JEL Classification:

R21, R31, R52

BORIS DOI:

10.7892/boris.142280

URI:

https://boris.unibe.ch/id/eprint/142280

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