An Estimation of Housing Supply Function for Urban and Rural areas in Isfahan province (1991-2011)

In the housing market, the supply of residential units is affected by factors such as workforce wages, building materials’ prices, financial credits and etc. Besides these factors, unique features of housing such as durablity, being heterogenous and being immovable can influence the supply. Moreover, residential units can be considered to have the quality of investment as well as the quality of consumption. In this paper, besides considering a production function which includes investment, the effects of opportunity costs on deciding for investment is captured by the model according to the modern theories in the housing market and using Locus supply approach and adjustment costs. In order to be able to capture the effect of unique features of housing, this function has been estimated for different region of the province. The result obtained from the estimation of the supply function in different areas, reveals that the housing supply in these regions is mostly influenced by the supply of land, and the elasticities of the supply of wages, financial credit supplies and housing prices are slow.