A Decision of a Lifetime: Housing Tenure Choice under Randomised Prices

Summary

This paper studies how households react when property prices change. Using a randomised survey experiment in Austria, it shows that lower prices raise renters’ willingness to buy and higher prices raise owners’ willingness to sell. A dynamic model for renters helps explain these choices: the bigger the gap between a renter’s reservation price and the offered price, the more likely the offer is accepted. Overall, willingness to transact remains limited.

Highlights

Households respond to property prices
Households respond to price changes in the expected direction, but the overall willingness to transact remains limited. Even sizeable price changes lead to only modest changes in stated willingness to buy or sell.

Limited willingness to transact property
Even at a 20% discount relative to market value, only a minority of renters are willing to buy, while owners’ willingness to sell remains lower across the full price range.

Modelling implied gaps matter
The model links renter behaviour to a reservation price: the larger the reservation-price gap, meaning the more attractive the offer, the higher the probability that the renter accepts it.