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The effect of land lease on house prices

Journal article
Authors P. A. Gautier
Aico van Vuuren
Published in Journal of Housing Economics
Volume 46
ISSN 1051-1377
Publication year 2019
Published at Department of Economics
Language en
Links dx.doi.org/10.1016/j.jhe.2019.10164...
Subject categories Economics

Abstract

In Amsterdam, houses located on private land and houses with various land-lease contracts coexist. This paper estimates the market valuation of future land-lease payments on the house price. This is useful for cities (like Amsterdam) that want to offer infinite lease terms, and can be also used to estimate long-run discount rates. We investigate the impact of: (i) the number of years that the land lease has been paid in advance and (ii) the amount that must be paid up front. Depending on the specification, houses on privately owned land are, on average, 11–13% more expensive than observably equivalent houses with a (non-prepaid) land-lease contract. Each year that no land lease has to be paid increases the price of a house by approximately 0.2%. Those findings correspond to a discount rate of 4% per year. © 2019 Elsevier Inc.

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