Forecasting the Prices and Rents for Flats in Large German Cities
AbstractIn this paper, we make multi-step forecasts of the monthly growth rates of the prices and rents for flats in 26 largest German cities. Given the small time dimension, the forecasts are done in a panel-data format. In addition, we use panel models that account for spatial dependence between the growth rates of housing prices and rents. Using a quasi out-of-sample forecasting exercise, we find that both pooling and accounting for spatial effects helps to substantially improve the forecast performance compared to the benchmark models estimated for each of the cities separately. In addition, a true out-of-sample forecasting of the growth rates of flats' prices and rents for the next six months is done. It shows that in most cities both prices and rents for flats are going to increase. In some cities, the average monthly growth rate even exceeds 1%, which is a very strong increase compared to the overall price level increase of about 2% per year.
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Bibliographic InfoPaper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 1207.
Length: 30 p.
Date of creation: 2012
Date of revision:
Housing prices; housing rents; forecasting; dynamic panel model; spatial autocorrelation; German cities;
Find related papers by JEL classification:
- C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
- C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
- C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-05-08 (All new papers)
- NEP-FOR-2012-05-08 (Forecasting)
- NEP-URE-2012-05-08 (Urban & Real Estate Economics)
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