The effect of land lease on house prices

Pieter A. Gautier, Aico van Vuuren

Research output: Contribution to JournalArticleAcademicpeer-review

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.

Original languageEnglish
Article number101646
Pages (from-to)1-11
Number of pages11
JournalJournal of Housing Economics
Volume46
Early online date9 Sep 2019
DOIs
Publication statusE-pub ahead of print - 9 Sep 2019

Fingerprint

House prices
Lease
Discount rate
Market valuation
Payment

Keywords

  • House prices
  • Land lease

Cite this

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title = "The effect of land lease on house prices",
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.",
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The effect of land lease on house prices. / Gautier, Pieter A.; Vuuren, Aico van.

In: Journal of Housing Economics, Vol. 46, 101646, 01.12.2019, p. 1-11.

Research output: Contribution to JournalArticleAcademicpeer-review

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