A0940
Title: Will the energy transition lead to higher housing prices? Estimation with panel data
Authors: Bruce Morley - University of Bath (United Kingdom) [presenting]
Abstract: The world economy has recently been experiencing unusually high inflationary pressures, especially in energy prices, as it has reopened after the shutdowns due to the coronavirus outbreak. The purpose is to investigate the impacts of changes in energy prices on housing prices in the context of the transition to a low-carbon economy. Using the conventional housing no-arbitrage model, augmented for energy prices, it estimates the specific impact of energy prices using panel data of 15 advanced economies from 1970 to 2015. Results suggest there is a significant role for energy prices in driving housing prices. Contrary to conventional wisdom, but coherently with the proposed framework and other estimates, results suggest that increases in energy prices would have a recessive impact on the housing markets once other key economic variables are controlled for. The estimates point as well to the importance of financial lending constraints, with the ratio of mortgages over GDP increasing significantly over the period, as well as housing supply conditions in explaining trends in housing prices. This highlights the financial imbrications of the energy-housing relationship and advocates for integrating energy prices in financial stability monitoring systems.
