European Metropolitan Housing Markets

362 Pages·2007·6.29 MB·English

by  Åke E. Andersson

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·
Åke E. Andersson Lars Pettersson
Ulf Strömquist (Editors)
European
Metropolitan
Housing Markets
With139Figures
and94Tables
123
ProfessorÅkeE.Andersson
LarsPetterssonPhD
JönköpingInternationalBusinessSchool
P.O.Box1026
55111Jönköping
Sweden
[email protected]
[email protected]
UlfStrömquist
Temaplan
PeterMyndesbacke16
11886Stockholm
Sweden
[email protected]
LibraryofCongressControlNumber:2007924899
ISSN1430-9602
ISBN978-3-540-69891-3SpringerBerlinHeidelbergNewYork
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Contents
1 European Housing Markets – An Overview.............................................1
Åke E. Andersson, Lars Pettersson and Ulf Strömquist
2 An Analysis of the Housing Market in Greater Brussels.......................27
Didier Baudewyns
3 Metropolitan Housing Markets– The Case of Helsinki..........................63
Heikki A. Loikkanen and Henrik Lönnqvist
4 Housing Markets and Policies in the Munich Metropolitan Area........85
Peter Friedrich and Christian Piesch
5 Recovery and Change: Glasgow’s Housing 1991–2001........................121
Duncan Maclennan
6 The Housing Market in Zurich’s Urban Agglomeration.....................145
Angelo A. Rossi
7 The Amsterdam Metropolitan Housing Market: How a
Prosperous Metropolitan Area Co-exists with a Central City
Dominated by Social Rental Housing for the Poor...............................165
Arno J. van der Vlist and Piet Rietveld
8 The Oslo Metropolitan Housing Market...............................................189
Viggo Nordvik
9 The Milan Housing Market....................................................................213
Roberto Camagni and Dino Martellato
10 Housing in Vienna...................................................................................241
Hanns Abele and Andrea Höltl
11 Housing Market and Housing Policy in Hamburg. Evidence and
Prospects..................................................................................................269
Annekatrin Niebuhr
VI Contents
12 Housing Market and Housing Policy in Copenhagen..........................297
Hans Skifter Andersen
13 The Stockholm Housing Market............................................................323
Stellan Lundström and Mats Wilhemsson
Figures................................................................................................................341
Tables.................................................................................................................347
Contributors......................................................................................................351
Index ..................................................................................................................355
1 European Housing Markets – An Overview
Åke E. Andersson1, Lars Pettersson1 and Ulf Strömquist2
1Jönköping International Business School, Jönköping University, Jönköping
2Temaplan, Stockholm

1.1 Introduction
The performance of the housing and the real estate markets is important for na-
tions, regions and individuals. When major changes take place on these markets
they often have impacts on other sectors of the economy. Everyday life of people
is very much influenced of where and how they live and reside as well.
For any analyst entering this field of research it is evident that there are differ-
ences as well as similarities between housing markets in different countries and
regions. For example, most countries in Europe have a regime of regulation of
rents, but there are differences with respect to how these policies have been im-
plemented. In general, rent regulations were introduced during the time of the
World Wars with the purpose to prevent landlords from taking advantage of the
problems related to extreme scarcity. This first generation of rent control aimed at
freezing the rents. The second generation of rent control regimes of the 1960s and
1970s were more flexible, allowing rents to adjust with respect to changes in con-
struction costs and inflation. A third generation of rent control, introduced in the
1980s and the 1990s, is the so-called ‘tenancy rent control’, where rents are regu-
lated within a given tenure, but unregulated for new tenures. Different countries
have transformed their policies to different degrees. Currently, there are countries
that have rent regulation from either the second or the third generation, while
some countries have abandoned rent regulation. The situation is similar for subsi-
dies, allowances, and other policy instruments.
When looking back on the historic development of the housing markets in
Europe, the influence of the World War II is evident. Firstly, a substantial new
construction took place after the war had ended, which now is in ripe for renewal
and upgrading. Secondly, the fear of problems that were expected to follow after
the war led to a number of policy interventions during the decades following the
war. Construction programmes and rent regulation are examples of the post-war
2 Åke E Andersson, Lars Pettersson and Ulf Strömquist
policy. Many countries have developed their hard rent control into second, and
even third, generations of rent regulation regimes. In some countries (for example
Norway and Finland) regulations have been abandoned during recent years.
This book offers a number of studies from metropolitan regions of different
European countries. The metropolitan regions belong to the same size class in or-
der to provide a useful comparative overview. The metropolitan regions of Am-
sterdam, Brussels, Copenhagen, Glasgow, Hamburg, Helsinki, Milan, Munich,
Oslo, Stockholm, Zurich and Vienna are included in the analysis. The size of these
metropolitan regions spans from around one million to a bit less than four million
inhabitants.
The case studies in this volume focus on the development during the recent
decades and include both quantitative and qualitative analysis. In this way differ-
ent aspects of the interactions between urban structures, the economy and the
housing market is revealed.
The housing markets of the different metropolitan regions differ. The overview
of the metropolitan regions included in the study reveals differences in market per-
formance (Temaplan 2003).1 In Vienna and Milan more than 90 per cent of all
housing is found in multifamily houses. In these metropolitan regions the interac-
tion with the single-family housing market plays a minor role. The situation is the
opposite in Oslo, Amsterdam and Brussels, where multifamily houses represent
only less than 45 per cent of the market. Multifamily houses dominate the housing
market in the average metropolitan regions, with market shares of 60 per cent or
more.
There are also substantial differences between the metropolitan regions with re-
spect to the growth of the total number of apartments during the 1990s. Helsinki
had a growth rate of 18 per cent of the number of apartments in multifamily
houses between 1990 and 2000. The corresponding growth rate in the other met-
ropolitan regions was between 7 and 12 per cent, except for Copenhagen and Mi-
lan, which had the lowest increase in the number of apartments of only 3–4 per
cent in the same time period.2 A panel of experts from the regions have indicated
that there was an excess demand in all the metropolitan regions, except for Brus-
sels and Vienna in 2001/2002.3 The panel of experts also reported small housing
construction activities in most of the metropolitan regions. Construction was judge
to be in balance ‘with long-term market conditions’ in Brussels and Vienna only.

1 The descriptive comparison in this analyse is based on Temaplan’s publication ‘Bench-
marking av Stockholms bostadsmarknad’ [Benchmarking of the housing market in
Stockholm] from 2003.
2 Data were not available for Brussels.
3 Local experts were contacted at the time when this project on ‘European Metropolitan
Housing Markets’ was carried out. These experts were asked questions about regional
conditions that could not be answered by analysing statistical sources. The experts were
people that acted professionally on respective markets.
European Housing Markets – An Overview 3
1.2 Market Interaction
Real estate is durable and price and production levels are determined on an asset
market. The pricing of real estate depends on the demand and the supply of hous-
ing units. The quantity of the demand for housing units and the propensity to pay
for housing services can be explained from the performance of the regional econ-
omy and the level of rent. The construction market supplies new real estate assets
and the net marginal revenue of real estate and the cost of new construction can
explain the activity in this market. The price of real estate and thus the net mar-
ginal revenue is then determined by the rental income asset owners can receive
from the houses. This also means that it is important to consider that the use of
real estate for housing space can be converted from one type of use to another.
DiPasquale and Wheaton (1996) have presented an illustrative model of the in-
teractions of the markets for housing, real estate, construction and assets. This
model combines demand-side dependency of the general conditions of the eco-
nomy and the determination of rents (R), formation of asset prices (P), construc-
tion activities (C) and the stock supply of housing (S). Also the required internal
rate of return (i) and the depreciation rate (δ) are considered in this model in a
somewhat simplified way by use of the following asset price equation:
T
R
P=∫R(t)e−itdt = 1−e−iT (1.1)
i  
0
R
forR(t)=R, if T →∞ and P→
i
where P is the asset price per square metre of housing at time 0, R is a flow of
net returns per square metre assumed to be constant, and i is the real rate of inte-
rest on housing. Fig. 1.1 also includes subsidies (n) net of tax on assets in the
equation that determines the price (P) on the asset market. Construction activity
(C) is assumed to be a function of the price (P) on the asset market; in a more gen-
eral context construction is a function of Tobin’s q, i.e. the ratio between the price
on real estate offered on the market and the price of newly constructed real estate.
q > 1 implies incentive to construct new housing, while q < 1 implies a change of
ownership of usage of assets.
Fig. 1.1 shows how equilibrium is determined and the way the adjustment proc-
ess on the market is carried out. If the demand for space increases (the northeast
quadrant) the price level will also increase (the northwest quadrant). This stimu-
lates the construction activity (the southwest quadrant) and increases the supply of
space by stock adjustment (the southeast quadrant). The supply of space will ad-
just according to the initial change in demand (the northeast quadrant). The ad-
justment process can be assumed to make its journey around the diagram, illustrat-
ing the solution to the underlying system of equations determining the equilibrium
of the markets.