engleski

The Role of Public Sector in the Transition of Housing Market

A decade after the beginning of the transition, the housing market in the Croatia is characterised with a controversy: a price of housing is increasing while number of total dwellings is larger than number of total households in both urban and rural areas. The first goal of this article is identification of variables, which have created environment where excess of supply over demand has resulted in rising prices. The identification of variables is done by construction of theoretical model of housing market. The theoretical model is based on stock and flow segmentation of housing market. The behaviour of agents is based on Poterba's "p" investment theory, which is variation of Tobin's "q" theory applied on residential investments, with incorporated asymmetric information and verification costs. The result of the described theoretical model is Amartya Sen's inefficient allocation of resources with under-consumption and over-consumption in the same market in the same time. Since the result of the theoretical model corresponds with empirical observation on the Croatian housing market, the next step is construction of the theoretical model of the government regulation, which is capable to solve the market default and bring the housing market towards equilibrium. The theoretical model of regulation is based on amending the misperception of the opportunity costs by economic agents and on altering the difference between private and social depreciation rate. The basic instruments of the constructed theoretical model are income tax and property tax. Furthermore, the model of regulation is based on theoretical foundations as well as on empirical observations. The empirical analysis is constructed as the comparison between the instruments of government regulation suggested by above mentioned theoretical model and the instruments of regulation in the developed housing markets of SAD, UK and Germany.

housing; transition; investment; public sector

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