A Decision of a Lifetime: Housing Tenure Choice under Randomised Prices

Buying a primary residence is one of the most important financial decisions house-holds make, yet there is little direct evidence on how willing households are to transact when property prices change. This decision is also central to policy debates on how to promote property ownership, for example through lower transaction costs, credit-market regulation, or targeted subsidies. We study this margin using randomised buy and sell offers embedded in the 2021 Austrian Household Finance and Consumption Survey, a representative household survey. Renters are asked whether they would pur-chase a property comparable to their current residence, and owners whether they would sell their current home, at experimentally varied prices equal to ±10% or ±20% around baseline values. Both renters’ willingness to buy and owners’ willingness to sell respond significantly to price variation in the expected direction. At the same time, the over-all willingness to transact remains limited. Even at a 20 percent discount relative to market value, only a minority of renters are willing to buy, while owners’ willingness to sell is lower across the full price range. Price responsiveness is stronger among lower-income renters, whereas older households display higher tenure inertia. We develop a parsimonious dynamic reservation-price framework for renters’ purchase decisions showing that the model-implied reservation-price gap strongly predicts experimental acceptance. Affordability matters, but it explains only part of the micro-level tenure inertia we document.
JEL Classification: D14, E43, G21, R21
Keywords: Household Finance, Tenure, Property, Randomised Control Trial, HFCS.