Modeling Housing Demand for New Residential Buildings in Urban Areas

Document Type: Research Paper


1 Associated Professor of International Economics in University of Tarbiat Modares

2 phD Candidate of economics in tarbiat modares university


his study investigates the factors affecting the demand for new residential buildings in urban areas of Iran during 1976-2010. The demand function for new residential buildings in urban areas was estimated and then the existence of a long-run relationship among variables of this function was studied using the Bounds testing of the Autoregressive Distributed Lag Co-integration procedure. The test confirmed a long-run relationship among the variables, so the coefficients of the short-term and long-term demand for new residential buildings were estimated. The results show that the average income of urban households has the biggest impact on the long-term demand of new residential buildings and its sign is positive. In the short-term, the biggest impact on the demand for new residential buildings is the average cost of constructing a residential building, with a negative impact on the demand.


  1. De Leeuw, F. (1971). ‘The Demand for Housing: A Review of Cross-Section Evidence’. The Review of Economics and Statistics, 53(1): 1-10.
  2. Donatos, G. (1995). ‘A Quantitative Analysis of Investment in New Housing in Greece’. Urban Studies, 32(9): 1475-87.
  3. Engle, R. and Granger, C. (1987). ‘Cointegration and Error Correction Representation: Estimation and Testing’. Econometrica, 55: 251-276.
  4. Fulpen, H., (1988). ‘An Analysis of the Housing Market in the Netherlands’. Urban Studies, 25: 190-203.
  5. Ge, X.J. and Lam, K.C. (2002). ‘Building a House Price Forecasting Model in Hong Kong’. The Australian Journal of Construction Economics and Building, 2(2): 57-70.
  6. Ghaderi, J. (2003). ‘Estimates of housing demand in urban areas’. Quarterly Journal of the Economic Research, 9 and 10: 111-132.
  7. Gholizadeh, A. (2008). Housing Price Theory in Iran (In Simple Words). Noor-e Elm, Tehran.
  8. Goodman, A.C. (2002). ‘Estimating Equilibrium Housing Demand for Stayers’. Journal of Urban Economics, 51: 1-24.
  9. Halicioglu, F. (2005). The Demand for New Housing in Turkey: An Application of ARDL Model. Prepared for '2005 Business and Economics Society International Conference', Grand Canyon, Arizona, USA.
  10. Khoshakhlagh, R., Emadzade, M. and Sharifi, M. (1999). ‘Estimation of Housing Demand Function with Using Hedonic Price’. Tahghighat- E- Eghtesadi, 55: 99-117.
  11. Lu, B. and Wang, CH. (2015). ‘Measuring the Market Efficiency of Housing Market in China: Based on the Perspective of Disequilibrium’. Open Journal of Social Sciences, 3: 127-133.
  12. Johansen, S. and Juseliuse, K. (1990). ‘Maximum Likelihood Estimation and Inference on Cointegration– With Application to the Demand for Money’. Oxford Bulletin of Economics and Statistics, 52: 169-210.
  13. Johansen, S. (1988). ‘Statistical Analysis of Cointegrating Vectors’. Journal of Economic Dynamics and Control, 12: 231-254.
  14. Malpezzi, S. and Mayo, S.K. (1987). ‘The Demand for Housing in Developing Countries: Empirical Estimates from Household Data’. Economic Development and Cultural Change, 35: 687-721.
  15. Mayo, S.K. (1981). ‘Theory and Estimation in the Economics of Housing Demand’. Journal of Urban Economics, 10: 95-116.
  16. Montazeri, M. (1992). Estimation of Residential Housing in Yazd Province. MA Thesis, Isfahan University.
  17. Muth, R.F. (1960). The Demand for Non-Farm Housing. The Demand for Durable Goods, Chicago University of Chicago Press.
  18. Najarzadeh, R. and Hoseinpour, M. (2006). ‘Investigating Employment in Iran’s Construction Sector’. Tahghighat- E- Eghtesadi, 41, 2(73): 329-344.
  19. Ouattara, B. (2004). Foreign Aid and Fiscal Policy in Senegal. Mimeo University of Manchester.
  20. Pahlevamzadeh, M. (1998). Estimation of Housing Demand Function in Isfahan Urban Areas (Investigating Importance of Effective Factors on Housing Demand). MA Thesis, Economic Faculty of Alzahra University.
  21. Pesaran, M.H., Shin, Y., and Smith, R.J. (2001). ‘Bounds Testing Approaches to the Analysis of Level Relationships’. Journal of Applied Econometrics, 16: 289-326.
  22. Pesaran, M.H. and Shin, Y. (1999). An Autoregressive Distributed Lag Modeling Approach to Cointegration Analysis. Chapter 11 in Econometrics and Economic Theory in 20th Century: The Ragner Frisch Centennial Symposium, Cambridge University of Cambridge Press.
  23. Phillips, P. and Hansen, B. (1990). ‘Statistical Inference in Instrumental Variables Regression With I(1) Process’. Review of Economic Studies, 57: 99-125.
  24. Reichert, A.K. (1990). ‘The Impact of Interest Rates, Income and Employment upon Regional Housing Prices’. Journal of Real Estate Economics, 3: 373-391.