Macroeconomic Determinants of International Housing Markets
Journal
Journal of Housing Economics
ISSN
1051-1377
ISSN-Digital
1096-0791
Type
journal article
Date Issued
2010-03-01
Author(s)
Abstract
This paper examines the long-term impact and short-term dynamics of macroeconomic variables on international housing prices. Since adequate housing market data are generally not available and usually of low frequency we apply a panel cointegration analysis consisting of 15 countries over a period of 30 years. Pooling the observations allows us to overcome the data restrictions which researchers face when testing long-term relationships among single real estate time series. This study does not only confirm results from previous studies, but also allows for a comparison of single country estimations in an integrated equilibrium framework. The empirical results indicate house prices to increase in the long-run by 0.6% in response to a 1% increase in economic activity while construction costs and the long-term interest rate show average long-term effects of approximately 0.6% and ?0.3%, respectively. Contrary to current literature our estimates suggest only about 16% adjustment per year. Thus the time to full recovery may be much slower than previously stated, so that deviations from the long-term equilibrium result in a dynamic adjustment process that may take up to 14 years.
Language
English
HSG Classification
contribution to scientific community
Refereed
No
Publisher
Elsevier
Publisher place
Amsterdam
Volume
19
Number
1
Start page
38
End page
50
Pages
13
Subject(s)
Eprints ID
217583