Author
Name: Mateusz Tomal Organisation: Krakow University of Economics, Poland Position: Assistant professor |
The Endowment Effect and Housing Studies: The Role of Multiple Reference Points
One of the most researched and proven behavioural biases is the endowment effect, which manifests in people's higher valuation of goods they own relative to goods they do not. Loss aversion is considered the main cause of the endowment effect because of the assumption that losses loom larger than gains. Whether decisions are framed as either gains or losses depends on the adopted reference point, which is usually taken as current ownership. Mainstream behavioural economics also postulates that the decision-making process involves multiple reference points. This study aims to provide new arguments in favour of the existence of multiple reference points affecting the formation of the endowment effect based on theoretical reflections and empirical evidence from the housing market. A critical review of the literature, as well as an empirical study, revealed that there are multiple reference points in the housing market, the interaction between which leads to the endowment effect.
Self-reported and Market Home Values in Housing Wealth Inequality Measurement: Evidence from Warsaw and Prague
This paper aims to examine whether self-reported home valuations can be a substitute for objective market data in studies on the level of housing wealth inequality. In order to achieve this aim, information on subjective values of flats and their features in Warsaw (Poland) and Prague (Czechia) was used. Next, hedonic models were estimated to calculate the objective values of these residential properties. The results indicated that, on average, homeowners overestimated their real estate by 2.10% in Warsaw and underestimated by 5.49% in Prague. Finally, using tests for the equality of variances, it was examined whether the level of housing wealth inequality differed significantly when calculated using subjective and objective home values. The findings showed that self-reported home values cannot serve as a perfect proxy for market values when assessing the level of housing wealth inequality in both cities.
The Impact of the COVID-19 Pandemic on the Private Rental Housing Market in Poland: What Do Experts Say and What Do Actual Data Show?
The aim of the article is to determine the impact of the COVID-19 pandemic on the level of housing rents using the example of the City of Krakow. This study is based on objective data on rental prices and subjective information obtained from real estate agents using a questionnaire survey. The research revealed that the first wave of the COVID-19 pandemic actually led to a 6-7% decrease in prices in the rental market in Krakow, while at the same time the surveyed real estate agents had estimated that rents would drop by about 13%. With the second wave of the pandemic, it is possible to see that its immediate impact, i.e. between the third and fourth quarter of 2020, has led to a further 6.25% drop in rents. It should be noted that the latter decrease was very accurately predicted, both by the survey respondents and by the econometric models used. Finally, the results of the analysis also indicated that the worsening of the pandemic in the last quarter of 2020 will have a significant impact on rent levels in Krakow for all of next year. Regardless of how the economy develops, rental prices are forecast to fall further in 2021q1. However, in the subsequent quarters of 2021, rents are projected to increase, but ultimately their level will not return to pre-pandemic values even in 2021q4. The latter is likely to happen only in the second half of 2022.
