The Central Bank of Luxembourg published a study finding that households’ willingness to buy or sell their primary residence responds only modestly to substantial price changes. Based on a randomized experiment within the 2021 Austrian Household Finance and Consumption Survey, the research found that renters were more willing to buy at lower prices and homeowners more willing to sell at higher prices, but only a minority of renters would buy even at a 20% discount to the reference value. Homeowners’ willingness to sell was lower across the price range, while lower-income renters showed greater price sensitivity and older households were more likely to retain their existing tenure status. Affordability and credit constraints explain part of renters’ limited willingness to buy, but preferences for existing rental arrangements, expectations of better future opportunities and reluctance to change tenure also matter. The study’s model captures the option value of waiting and estimates a reservation price for each renter, with acceptance becoming more likely as the offered price falls below that threshold. It concludes that lower transaction costs, subsidies or easier credit conditions may support renters near the affordability threshold, but are unlikely by themselves to produce large shifts into homeownership because financial constraints interact with preferences for stability and the value of waiting.
Central Bank of Luxembourg study finds households respond only modestly to housing price changes
A Central Bank of Luxembourg study finds that households change their willingness to buy or sell homes only modestly in response to substantial price movements. Affordability measures may help renters near the ownership threshold, but financial constraints, preferences for stability and the option value of waiting are likely to limit broader tenure shifts.