The effect of consumers' expectations in a booming housing market: Space-time patterns in the Netherlands, 1999-2000

Jan Rouwendal*, Simonetta Longhi

*Corresponding author for this work

Research output: Contribution to JournalArticleAcademicpeer-review


Even though economic models have been relatively successful in explaining the long-run patterns of house prices, they have more difficulties in explaining short-run developments in the housing market. However, the fact that during such 'bubbles' the spatial pattern of house prices, which can mainly be attributed to accessibility differences, usually remains unchanged, suggests that the irrational forces that are presumably responsible for unexplained movements in house prices obey some regularities: they seem to affect the level of house prices, but not their spatial pattern. This suggests that it is worthwhile to consider the explanatory power of psychological variables like those reflecting general (nation-wide) feelings of optimism or pessimism. This paper considers the development of Dutch house prices in the years 1999 and 2000, when house prices increased fast. Existing explanations of the long-run development of Dutch house prices on the basis of economic fundamentals (notably income and the mortgage interest rate) would suggest a much more modest development of house prices over these years. The paper also shows that commonly used housing market indicators, notably the number of vacancies (houses for sale) and the time on the market, are unable to explain the development of house prices during this period. However, the paper finds a strong relationship between the development of house prices and the Dutch index of consumer confidence.

Original languageEnglish
Pages (from-to)291-317
Number of pages27
JournalHousing Studies
Issue number2
Publication statusPublished - 1 Mar 2008


  • Bubbles
  • Consumer confidence
  • House prices

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