Since 2005, Belgian housing prices have strongly increased. As the timing coincides with the implementation of a new fiscal package in order to stimulate homeownership, our study attempts to provide an understanding whether the mortgage interest and capital deduction (MICPD) policy has had the side-effect of increasing housing prices while, at the same time, controlling for key housing price determinants.
A fixed-effects regression model is used on a panel dataset of the three Belgian regions over the period 1995–2015.
Estimations are carried out separately for different house types, being useful as our empirical analysis ascertains a significant price-increasing effect for ordinary houses and apartments but a significant price-reducing effect for villas. In addition, we find, among other things, that interest rates' influence has been less substantial than commonly thought.
These results are relevant for all governments willing to stimulate homeownership through fiscal stimuli.
