Explaining regional variation in equilibrium real estate prices and income

► We link the real estate model of Potepan (1996) to the spatial equilibrium model of Roback (1982). ► We prove the interdependencies of housing prices, rental prices, building land prices and income. ► We find significantly positive interaction effects of income and real estate prices. ► We confirm model predictions concerning the majority of exogenous determinants. ► Future population development seem to be important for disparities between regions in the long term.