Time-varying determinants of long-run house prices

The determinants of house prices change over time. This paper documents these changes using long-run historical data from Amsterdam from the year 1825 onwards. Because many houses in Amsterdam have survived until this day, we can construct a long-run repeat sales index and examine its determinants. We find that in the early beginnings of our transactions dataset population growth, construction costs and new housing supply are the most important determinants of house price dynamics. After 1900 income starts to play a role and, with the development of the mortgage market, interest rates as well. Directly after World War II population and investment in housing are key determinants of house prices, which likely reflects the baby boom generation and post-war reconstruction plans. Our results imply that the determinants of house prices are not fixed but change over time and reflect the economic state of affairs in each different era.