The influence of a mortgage interest and capital deduction policy on house prices: A regional study for different housing types in Belgium

Abstract

Purpose

Since 2005, Belgian housing prices have strongly increased. As the timing coincides with the implementation of a new fiscal package in order to stimulate homeownership, our study attempts to provide an understanding whether the mortgage interest and capital deduction (MICPD) policy has had the side-effect of increasing housing prices while, at the same time, controlling for key housing price determinants.

Design/methodology/approach

A fixed-effects regression model is used on a panel dataset of the three Belgian regions over the period 1995–2015.

Findings

Estimations are carried out separately for different house types, being useful as our empirical analysis ascertains a significant price-increasing effect for ordinary houses and apartments but a significant price-reducing effect for villas. In addition, we find, among other things, that interest rates' influence has been less substantial than commonly thought.

Originality/value

These results are relevant for all governments willing to stimulate homeownership through fiscal stimuli.

Citation

Vangeel, W., Defau, L. and De Moor, L. (2020), "The influence of a mortgage interest and capital deduction policy on house prices: A regional study for different housing types in Belgium", Journal of Property Investment & Finance, Vol. 38 No. 6, pp. 563-577. https://doi.org/10.1108/JPIF-08-2019-0102