Infoscience

Conference paper

Triggers for housing development

What leads to the development of residential construction projects? If the economic literature is to be believed, developers analyse market opportunities. However, it is difficult to assess those opportunities, for several reasons, e.g. long time horizon for developers who intend to remain owners of the completed dwellings and no coordination between developers. The latter problem concerns particularly developers who intend to sell their project upon completion (market developers). Is housing development really predominantly the result of market analysis? Micro analyses reveal that particular circumstances also play an important role: the availability of a particular piece of land, financing conditions, land regulation, etc. This article is designed to assess the shares of projects that are initiated on the basis of market analysis as opposed to other trigger factors. If that share is small, it is unlikely that house building can be explained or predicted with standard economic models of supply and demand. It also means that macroeconomic housing policy (lowering interest rates, subsidies designed to increase profitability, even rent deregulation) will not be very effective. A unique database was created by surveying 2,257 developers who built multi-unit residential buildings in the 1990s in Switzerland.

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