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(A)Synchronous Housing Markets of Global Cities

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  • Bhatt, Vipul
  • Kishor, N. Kundan

Abstract

In this paper we examine house price synchronization in 15 global cities using real house price data from 1995:Q1-2020:Q2. We find that although there is evidence for bilateral positive phase synchronization, there is no evidence for an integrated global housing market for our sample of cities. Using a hierarchical clustering approach, we identify three clusters of cities with similar housing price cycles that are not solely determined by geographic proximity. We interpret this finding as suggestive of a rather segmented housing market for the global cities in our sample. Using a dynamic factor model with time-varying stochastic volatility we decompose a city's real housing price growth into a global component, a cluster-based component, and an idiosyncratic component. For most cities in our sample, the global component plays a minor role, whereas the cluster-based factor explains a large fraction of the observed variation in real house price growth with its contribution peaking during the Great Recession of 2007-09

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  • Bhatt, Vipul & Kishor, N. Kundan, 2021. "(A)Synchronous Housing Markets of Global Cities," MPRA Paper 107175, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:107175
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    More about this item

    Keywords

    Global Housing Market; House Price Synchronization; Cluster Analysis; Dynamic Factor Model;
    All these keywords.

    JEL classification:

    • C38 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Classification Methdos; Cluster Analysis; Principal Components; Factor Analysis
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • F44 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Business Cycles
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General

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