On the Turnaround of Vacancy Stocks: The Stock Flow Model for the German Residential Rental Market
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International Real Estate Review
We apply the stock flow model for the German residential rental market using a data set that includes the overwhelming majority of nomenclature of territorial units for statistics (NUTS) 3 regions for the 2004-2007 period. Aside from proving conditional rental price convergence, we have detected a turnaround in vacancy stocks between the short and the long term. While East German counties and West German independent cities currently exhibit the highest and lowest vacancy rates, respectively, the opposite holds true at equilibrium. Leaning on theoretical suggestions, landlords in well-developed areas have incentives to hold onto vacancies in view of future rent increases. Our results support this idea, which demonstrates the significantly positive impact of household income and net birth rate on the natural vacancy rate.