The Unassuming Economist

In a separate report, Jérôme Vandenbussche (IMF) points out that residential prices and rents have increased steeply since 2009, particularly in big cities. This is due to an unexpected surge in housing demand that is explained by stronger than expected net immigration in recent years. In 2009, net immigration was expected to rise from near zero to about 100,000 persons in 2014. However, the actual figure turned out to be 550,000. In his analysis, Vandenbussche takes a look at the housing supply response to changes in house prices and finds “(…) evidence that the supply response to changes in housing prices has declined over the past several years (…).”

In terms of policies to boost the supply response,  Vandenbussche discusses the 10-point action program to stimulate residential construction. He also says that “(…) several other factors, including stricter rent regulation and higher taxation of real estate transactions, are likely to have played a role in the recent decline of the price elasticity of residential investment [This includes] Two tightening rent control measures were taken in recent years (…) The real estate transfer tax rate has been continuously creeping up since 2006 (…) Other factors likely include inadequate staffing at planning and building authorities, and growing shortages of skilled worker in the finishing trade.”