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Investment Demand and Housing Prices in an Emerging Economy

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  • Ming-Chi Chen

    ()
    (National Sun Yat-sen University)

  • Chin-Oh Chang

    (National Chengchi University)

  • Chih-Yuan Yang

    (National Tsing Hua University)

  • Bor-Ming Hsieh

    ()
    (Chang Jung Christian University)

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    Abstract

    This paper hypothesizes that the increase in money supply induced by rapid economic growth leads to strong investment demand in the Taiwanese housing market. A threshold model is used to confirm money supply as the key threshold variable. When the growth rate of money supply is below the model's estimated threshold value, household number, income, and user cost of housing capital are significant variables. It appears that service demand and housing supply are essential in creating the linear movement of housing prices. However, when the growth rate of money supply exceeds the threshold value, stock prices and the inflation rate become important. These findings suggest that non-linear movement of housing prices is primarily driven by investment demand.

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    Bibliographic Info

    Article provided by American Real Estate Society in its journal journal of Real Estate Research.

    Volume (Year): 34 (2012)
    Issue (Month): 3 ()
    Pages: 345-374

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    Handle: RePEc:jre:issued:v:34:n:3:2012:p:345-374

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    Postal: American Real Estate Society Clemson University School of Business & Behavioral Science Department of Finance 401 Sirrine Hall Clemson, SC 29634-1323
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    Postal: Diane Quarles American Real Estate Society Manager of Member Services Clemson University Box 341323 Clemson, SC 29634-1323
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    Web: http://aux.zicklin.baruch.cuny.edu/jrer/about/get.htm

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    Cited by:
    1. Zeng, Jhih-Hong & Peng, Chi-Lu & Chen, Ming-Chi & Lee, Chien-Chiang, 2013. "Wealth effects on the housing markets: Do market liquidity and market states matter?," Economic Modelling, Elsevier, vol. 32(C), pages 488-495.
    2. Tsai, I-Chun, 2013. "The asymmetric impacts of monetary policy on housing prices: A viewpoint of housing price rigidity," Economic Modelling, Elsevier, vol. 31(C), pages 405-413.

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