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The Determinants of House Prices and Construction: An Empirical Investigation of the Swiss Housing Economy

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  • Karol Jan Borowiecki

    ()
    (Swiss Banking Institute)

Abstract

This paper studies the Swiss housing price determinants. The Swiss housing economy is reproduced by employing a macro-series from the last seventeen years and constructing a vector-autoregressive model. Conditional on a comparatively broad set of fundamental determinants considered, i.e. wealth, banking, demographic and real estate specific variables, the following findings are made: 1) real house price growth and construction activity dynamics are most sensitive to changes in population and construction prices, whereas real GDP, in contrary to common empirical findings in other countries, turns out to have only a minor impact in the short-term, 2) exogenous house price shocks have no long-term impacts on housing supply and vice versa, and 3) despite the recent substantial price increases, worries of overvaluation are unfounded. Furthermore, based on a self-constructed quality index, evidence is provided for a positive impact of quality improvements in supplied dwellings on house prices.

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Bibliographic Info

Article provided by Asian Real Estate Society in its journal International Real Estate Review.

Volume (Year): 12 (2009)
Issue (Month): 3 ()
Pages: 193-220

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Handle: RePEc:ire:issued:v:12:n:03:2009:p:193-220

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Postal: Asia Real Estate Society, 51 Monroe Street, Plaza E-6, Rockville, MD 20850, USA
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Related research

Keywords: Housing Demand; Housing Supply and Markets;

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References

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  1. David Rae & Paul van den Noord, 2006. "Ireland's Housing Boom: What has Driven it and Have Prices Overshot?," OECD Economics Department Working Papers 492, OECD Publishing.
  2. Kenny, Geoff, 2003. "Asymmetric adjustment costs and the dynamics of housing supply," Economic Modelling, Elsevier, vol. 20(6), pages 1097-1111, December.
  3. Steven C. Bourassa & Martin Hoesli, 2006. "Why Do the Swiss Rent?," Swiss Finance Institute Research Paper Series 07-04, Swiss Finance Institute.
  4. Meen, Geoffrey, 2002. "The Time-Series Behavior of House Prices: A Transatlantic Divide?," Journal of Housing Economics, Elsevier, vol. 11(1), pages 1-23, March.
  5. Karl E. Case & Robert J. Shiller, 1990. "Forecasting Prices and Excess Returns in the Housing Market," NBER Working Papers 3368, National Bureau of Economic Research, Inc.
  6. Oikarinen, Elias, 2005. "Is Housing Overvalued in the Helsinki Metropolitan Area?," Discussion Papers 992, The Research Institute of the Finnish Economy.
  7. Jonathan McCarthy & Richard W. Peach, 2004. "Are home prices the next "bubble"?," Economic Policy Review, Federal Reserve Bank of New York, issue Dec, pages 1-17.
  8. Holly, Sean & Jones, Natasha, 1997. "House prices since the 1940s: Cointegration, demography and asymmetries," Economic Modelling, Elsevier, vol. 14(4), pages 549-565, October.
  9. Riddel, Mary, 2004. "Housing-market disequilibrium: an examination of housing-market price and stock dynamics 1967-1998," Journal of Housing Economics, Elsevier, vol. 13(2), pages 120-135, June.
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Cited by:
  1. Karol Jan Borowiecki, 2012. "Dynamics of a Protected Housing Market: The Case of Switzerland," Urban Studies, Urban Studies Journal Limited, vol. 49(14), pages 3195-3210, November.
  2. Konstantin A. Kholodilin, 2012. "Internet Offer Prices for Flats and Their Determinants: A Cross Section of Large European Cities," Discussion Papers of DIW Berlin 1212, DIW Berlin, German Institute for Economic Research.

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