The influence of recurrent property income and expenditure on house prices in European Union countries: Evidence from a panel model

Abstract

Abstract Land value capture can be defined as a policy approach that allows communities to restore and reinvest land value increases that result from public investment and other government actions. For that reason, public action should generate public benefit. The recurrent property tax, one of many tools for land value capture, is the foundation of a stable, enduring revenue source that supports the provision of essential housing and amenities services. This empirical paper aims to examine the influence of recurrent property tax income, and general government spending on housing and community amenities on house prices. To assess the hypothesized direction of the effects, yearly data structured in a balanced panel on a sample of 26 European Union economies from 2010 to 2019 was used. Fixed effects regression model with Driscoll and Kraay standard errors was employed and the results confirmed a negative but statistically insignificant effect of increased property tax revenue on house prices, while increased expenditure on housing and amenities confirmed a positive and statistically significant effect on house prices dynamics in European Union countries.