The Effect of Land Lease on House Prices

Abstract

In Amsterdam, houses located on private land and houses with various land-lease contracts coexist. The city of Amsterdam plans to abandon the present system. This requires an estimate of the market valuation of future land-lease payments on the house price. We investigate the impact on house prices of: (i) the number of years that the land lease has been paid in advance and (ii) the amount that must be paid up front. Houses on privately owned land are on average 10% more expensive. Houses with a land-lease contract that has been paid in advance are 0.41% more expensive for each year that no land lease has to be paid. We find a negative impact of the land-lease rent that needs to be paid on the house price.