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Evidence on the variation of idiosyncratic risk in house price appreciation

Author

Listed:
  • Jaqueson Galimberti

    (School of Economics, Auckland University of Technology)

  • Lydia Cheung

    (School of Economics, Auckland University of Technology)

  • Philip Vermeulen

    (School of Economics, Auckland University of Technology)

Abstract

Using around one million repeat sales observations of single-family homes across New Zealand, over the period 1992 to 2021, we provide evidence that idiosyncratic risk in real house price appreciation varies considerably across houses. We find that idiosyncratic risk is time varying, depends negatively on the initial house price, varies strongly across locations and reduces significantly as the holding period of the house increases. Location is the most important of these factors. By buying an above the median house in a low-risk region, and holding on to the property for a longer period, households can significantly reduce idiosyncratic risk.

Suggested Citation

  • Jaqueson Galimberti & Lydia Cheung & Philip Vermeulen, 2022. "Evidence on the variation of idiosyncratic risk in house price appreciation," Working Papers 2022-05, Auckland University of Technology, Department of Economics.
    • Handle: RePEc:aut:wpaper:202205
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    More about this item

    Keywords

    idiosyncratic risk; house prices; housing markets;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • R1 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics

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