Housing Price Elasticity in France : a comparative study of Paris and the Provinces (2000-2025) : Supply inelasticity and monetary policy transmission

Sammanfattning

This thesis examines whether the housing market of Paris (Île-de-France) reacts more strongly to interest rate changes than the provincial markets of France, using quarterly data spanning 2000-Q1 to 2025-Q4. The study is motivated by the structural distinction between Paris: a supply-inelastic market where geographic and regulatory constraints prevent meaningful expansion of the housing stock, and the French provinces, where supply is more elastic and price dynamics are driven more by local labour market conditions than by financial flows. The findings support the supply-inelasticity hypothesis and contribute to a limited empirical literature on within-country heterogeneity in monetary policy transmission to housing markets. The results suggest that the Paris housing market has undergone a structural shift since 2011, transitioning from a standard residential market to one that behaves increasingly as a financialised asset class, highly sensitive to the interest rate environment and structurally disconnected from provincial price dynamics. These findings have implications for financial stability policy in France, as a single national mortgage rate interacts with regional markets that differ structurally in ways that standard aggregate models do not capture.