Relationship between House Prices and Inflation in South Africa: An ARDL Approach
AbstractThis paper investigates the long-run impact of inflation on homeowner equity in South Africa by analysing the relationship between house prices and the prices of non-housing goods and services. Quarterly data series are collected for the luxury, large middle-segment, medium middle-segment, small middle-segment and the entire middle segment of house prices, as well as, the consumer price index excluding housing costs for the period 1970:Q1–2011:Q1. Based on autoregressive distributed lag (ARDL) models, the empirical results indicate long-run cointegration between the house prices of all the segments and the consumer price index excluding housing costs. Moreover, the long-run elasticity of house prices with respect to prices of non-housing goods and services, i.e., the Fisher coefficient is greater than one for the luxury segment, virtually equal to one for the small middle-segment, and less than one for the large and medium middle-segments, as well as the affordable segments. More importantly though, the estimated Fisher coefficients are not statistically different from unity – a result consistent with the proposed theoretical framework relating housing prices and consumer prices excluding housing expenditure. In general, we infer that house prices in South Africa provide a stable, but quantitatively minor, inflation hedge in the long-run.
Download InfoTo our knowledge, this item is not available for download. To find whether it is available, there are three options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
Bibliographic InfoPaper provided by University of Pretoria, Department of Economics in its series Working Papers with number 201130.
Length: 10 pages
Date of creation: Nov 2011
Date of revision:
House prices; Inflation; South Africa;
Find related papers by JEL classification:
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
- E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
- R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Sonali Das & Rangan Gupta & Alain Kabundi, 2009.
"Could we have predicted the recent downturn in the South African Housing Market?,"
149, Economic Research Southern Africa.
- Das, Sonali & Gupta, Rangan & Kabundi, Alain, 2009. "Could we have predicted the recent downturn in the South African housing market?," Journal of Housing Economics, Elsevier, vol. 18(4), pages 325-335, December.
- Sonali Das & Rangan Gupta & Alain Kabundi, 2008. "Could We Have Predicted The Recent Downturn In The South African Housing Market?," Working Papers 200831, University of Pretoria, Department of Economics.
- Mehmet Balcilar & Abebe D. Beyene & Rangan Gupta & Monaheng Seleteng, 2011. ""Ripple" Effects in South African House Prices," Working Papers 201102, University of Pretoria, Department of Economics.
- Lewis J. Spellman, 1981. "Inflation and Housing Prices," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 9(3), pages 205-222.
- Mehmet Balcilar & Rangan Gupta & Zahra Shah, 2010.
"An In-Sample and Out-of-Sample Empirical Investigation of the Nonlinearity in House Prices of South Africa,"
201008, University of Pretoria, Department of Economics.
- Balcilar, Mehmet & Gupta, Rangan & Shah, Zahra B., 2011. "An in-sample and out-of-sample empirical investigation of the nonlinearity in house prices of South Africa," Economic Modelling, Elsevier, vol. 28(3), pages 891-899, May.
- Michael T. Bond & Michael J. Seiler, 1998. "Real Estate Returns and Inflation: An Added Variable Approach," Journal of Real Estate Research, American Real Estate Society, vol. 15(3), pages 327-338.
- Paresh Kumar Narayan, 2005. "The saving and investment nexus for China: evidence from cointegration tests," Applied Economics, Taylor & Francis Journals, vol. 37(17), pages 1979-1990.
- Rangan Gupta & Sonali Das, 2008.
"Spatial Bayesian Methods of Forecasting House Prices in Six Metropolitan Areas of South Africa,"
200813, University of Pretoria, Department of Economics.
- Rangan Gupta & Sonali Das, 2008. "Spatial Bayesian Methods Of Forecasting House Prices In Six Metropolitan Areas Of South Africa," South African Journal of Economics, Economic Society of South Africa, vol. 76(2), pages 298-313, 06.
- Gupta, Rangan & Jurgilas, Marius & Kabundi, Alain, 2010.
"The effect of monetary policy on real house price growth in South Africa: A factor-augmented vector autoregression (FAVAR) approach,"
Elsevier, vol. 27(1), pages 315-323, January.
- Rangan Gupta & Marius Jurgilas & Alain Kabundi, 2009. "The Effect Of Monetary Policy On Real House Price Growth In South Africa: A Factor Augmented Vector Autoregression (Favar) Approach," Working Papers 200905, University of Pretoria, Department of Economics.
- Sonali Das & Rangan Gupta & Patrick Agu Kaya, 2009.
"Convergence of Metropolitan House Prices in South Africa: A Re-Examination Using Efficient Unit Root Tests,"
200922, University of Pretoria, Department of Economics.
- Sonali DAS , Rangan GUPTA & Patrick A. KAYA, 2010. "Convergence Of Metropolitan House Prices In South Africa: A Re-Examination Using Efficient Unit Root Tests," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 10(1).
- Ali Anari & James Kolari, 2002. "House Prices and Inflation," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 30(1), pages 67-84.
- Ziramba, Emmanuel, 2008. "The demand for residential electricity in South Africa," Energy Policy, Elsevier, vol. 36(9), pages 3460-3466, September.
- M. Hashem Pesaran & Yongcheol Shin & Richard J. Smith, 2001. "Bounds testing approaches to the analysis of level relationships," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 289-326.
- Sonali Das & Rangan Gupta & Patrick T Kanda, 2010. "Bubbles in South African House Prices and their Impact on Consumption," Working Papers 201017, University of Pretoria, Department of Economics.
- Luis A. Gil-Alana & Goodness C. Aye & Rangan Gupta, 2012.
"Testing for Persistence with Breaks and Outliers in South African House Prices,"
201233, University of Pretoria, Department of Economics.
- Luis A. Gil-Alana & Goodness C. Aye & Rangan Gupta, 2012. "Testing for Persistence with Breaks and Outliers in South African House Prices," Faculty Working Papers 20/12, School of Economics and Business Administration, University of Navarra.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Rangan Gupta).
If references are entirely missing, you can add them using this form.