Abstract

This study embarks on an exploration of the intricate relationship between land prices and housing prices within the dynamic urban landscape of Santiago, Chile, spanning from 2008 to 2019. Amidst an escalating housing affordability crisis and the burgeoning prevalence of informal settlements, this research seeks to elucidate the underlying factors contributing to housing price dynamics, with a particular emphasis on the role of land prices. Utilizing a robust dataset encompassing over 556,400 transactions, meticulously compiled from the Santiago Real Estate Registrar, this investigation employs a rigorous multi-criteria evaluation methodology, incorporating Granger causality analysis to dissect the complex interplay between various economic indicators. At the heart of this analysis lies the innovative application of weekly data transformations and the Augmented Dicky-Fuller test to ensure the stationarity of variables, thereby laying a solid foundation for the Granger causality assessment. The study’s findings illuminate a nuanced landscape where, contrary to prevailing assumptions, land prices do not exhibit a universally significant impact on housing prices. Instead, the influence of land prices on housing affordability is intricately linked to other pivotal factors, including mortgage interest rates, inflation, and market indices such as the Santiago Stock Exchange IPSA. This research not only challenges conventional wisdom regarding the primacy of land prices in housing market dynamics but also offers valuable insights into the multifaceted nature of real estate economics in Santiago. By unraveling the limited causality between land and housing prices, this study contributes a critical perspective to the ongoing discourse on urban development and housing policy in Chile. It underscores the imperative for policymakers to adopt a more holistic approach, considering a broader spectrum of economic variables in addressing the housing affordability crisis and fostering sustainable urban growth.