The Price of Politics: A County-Level Analysis of Political Uncertainty and German House Prices

This study examines the linkage between political uncertainty and housing market purchasing behavior in Germany. We measure politically related uncertainty using the media-based Uncertainty Perception Indicator, which captures domestic political uncertainty more comprehensively than conventional economic policy-focused measures, and examine its effects on housing markets using transaction data covering all 400 counties in Germany. Applying spatial regression techniques to address neighborhood spillover effects, we identify county-level house and condominium prices to be negatively associated with increased political uncertainty. The negative effect is further increased in counties with higher unemployment rates, with house prices showing greater sensitivity than condominium prices. Our results suggest that political uncertainty has a significant impact on homebuyer activity and housing market purchasing behavior, with implications for housing supply development in Germany.