House prices and household mortgages are characterized by large co-movements, but establishing a causal link between the two is a challenging task. Our paper aims to estimate the impact of mortgage supply policies on house prices and to examine whether the effect varies over the business cycle and/or across locations with different features.
Our results show that credit supply significantly affects the dynamics of household mortgages and, through these, house prices. The impact is moderately positive overall: a 10 per cent increase in mortgages causes a 1 per cent increase in prices. The effect is higher during housing market boom periods, in cities with a more rigid housing supply and where families are more dependent upon external finance.
Published in 2021 in: Journal of Economic Geography, v. 21, 1, pp.127-140.
