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REAL ESTATE ECONOMICS

TAUGHT BY - PROF. ANNA PIIL DAMM AND - POST DOC AHMAD HASSANI

INSTITUT FOR ØKONOMI ANNA PIIL DAMM AARHUS UNIVERSITET 30. APRIL 2019 PROFESSOR THE FUNDAMENTALS OF

1. Definition of real estate i) assets versus investments versus space use, ii) markets 2. The importance of real estate assets and investments in the macro economy 3. Determinants of real estate prices: i. What are the links between the market for use of real estate space and the real estate asset market? ii. What causes the common cycles in real estate prices and rents across local real estate markets? iii. Why may average prices develop differently in one local real estate market compared to other local real estate markets? iv. The role of taxation in the decision of whether to rent or own and in the decision on whether to invest in real estate instead of alternative assets. v. Test for housing demand “bubbles”. vi. The short-run imbalances in real estate markets.

Figure 1 Average real re-sale prices per square meter for one-family , 2004-2018

Source: Constructed by Anna Piil Damm using nominal average real re-sale prices for one- family from Realkreditrådet: www.rkr.statistikbank.dk/BM010 and the consumer price index from Statistics Denmark: www.dst.dk/Statistikbanken/Pris113. Base year: 2015.

INSTITUT FOR ØKONOMI ANNA PIIL DAMM AARHUS UNIVERSITET 30. APRIL 2019 PROFESSOR THE FUNDAMENTALS OF REAL ESTATE ECONOMICS, CONTINUED

4. What causes house price differences within a local housing market? i. Strong link between location of workplaces and location of workers. ii. Differences in local public goods provision. iii. Local land use regulation.

Figure 2 Annual listing rents in private rental housing. Commuting area of Aarhus. 2016. Listing rent (DKK per m2)

y = 1477e-0.014d R² = 0.4324

0 10 20 30 40 50 60 Distance to Aarhus City Center (km by roads), d Source: Small random sample of private rental adds from each postal district posted on the online private rental database “BoligPortal” in 2016. Note: Only private rental in buildings constructed after 1992 (market-determined rents). Listing rents, i.e. the rent stated in the ’s vacancy ad on BoligPortal. 45 postal districts constitute the commuting area of Aarhus. The trend line is fitted using an exponential function.

INSTITUT FOR ØKONOMI ANNA PIIL DAMM AARHUS UNIVERSITET 30. APRIL 2019 PROFESSOR Course Goals 1. READ, UNDERSTAND AND DISCUSS REAL ESTATE MARKETS STATISTICS AND SCIENTIFIC PAPERS AND TEXTS ON TOPICS WITHIN REAL ESTATE ECONOMICS, BOTH RESIDENTIAL MARKETS AND MARKETS. 2. DESCRIBE, INTERPRET AND FORMULATE MODELS OF HOUSEHOLDS’ AND FIRMS’ DECISION MAKING AND BEHAVIOUR IN REAL ESTATE MARKETS, BOTH IN THE SHORT- AND LONG-RUN. 3. ANALYSE, IDENTIFY AND UNDERSTAND THE IMPLICATIONS OF GOVERNMENT REGULATION FOR THE METROPOLITAN-WIDE PATTERN OF LAND DEVELOPMENT. 4. ANALYSE, IDENTIFY AND UNDERSTAND THE UNDERLYING DETERMINANTS OF REGIONAL OR METROPOLITAN GROWTH, AND HENCE, THE DEMAND FOR LOCAL REAL ESTATE. 5. RELATE THE MODELS OF HOUSEHOLDS AND FIRMS AND REAL ESTATE MARKETS TO REAL URBAN ECONOMIC PROBLEMS. 6. APPLY THE MICROECONOMIC MODELS TO SOLVE ECONOMIC PROBLEMS REGARDING URBAN LAND USE. 7. APPLY THE MACROECONOMIC MODELS TO DETERMINE EQUILIBRIUM EFFECTS FROM EXOGENOUS SHOCKS TO THE REAL ESTATE MARKET. 8. APPLY THE MACRO-FINANCE MODELS TO TEST FOR HOUSING DEMAND “BUBBLES” AND FORECAST REAL ESTATE MARKETS.

INSTITUT FOR ØKONOMI ANNA PIIL DAMM AARHUS UNIVERSITET 30. APRIL 2019 PROFESSOR