Periods of economic growth are characterised by a demand for better housing quality and increasing prices. Affordability of the demand for higher quality then becomes a problem in the subsequent period of economic stagnation. This article seeks to identify the mechanism in which quality and affordability are weighed against each other, showing that the price-quality relationship changes with the economic growth. We do this against the background of the Dutch housing market. Our analysis shows that in a high-growth economy households search for better quality of property and are prepared to pay for it. In a stagnant economy the demand for quality takes second place to the demand for affordable homes. It also appears that appreciation of quality varies in particular between the low-growth phase and the medium-growth phase. The price-quality relationship barely varies between the medium-growth and high-growth phases.
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de Vries, Paul. "HOUSE PRICE, HOUSE QUALITY AND ECONOMIC GROWTH." In 17th Annual European Real Estate Society Conference. ERES: Conference. Milan, Italy, 2010.
Section: Housing Economics (6)