Convergence in Provincial-Level South African House Prices: Evidence from the Club Convergence and Clustering Procedure
AbstractThis empirical study analyses the long run behaviour of provincial house prices in South Africa based on the club convergence and clustering procedure of Phillips and Sul (2007). Using quarterly data covering the period of 1974Q1 to 2012Q4, 1976Q2 to 2012Q4, 1974Q1 to 2012 Q4 and 1977Q3 to 2012Q4 for the entire, large, medium and small-middle segments of the housing market, respectively, we test the law of one price across nine provinces. The empirical findings suggest that the nine provinces do not form a homogeneous convergence club. In particular, the aggregate housing market supports the presence of three convergence clubs with the tendency of provinces to converge or diverge varying across subsequent segments. Unlike the middle-small segment which consists of two convergence clubs of seven and two provinces, the middle-large and middle-medium segments are consistent with three convergence clubs corresponding to three segmented independent local markets. The first convergence club consists of four and five provinces, respectively. The second convergence club is made of four and three provinces, respectively, while the third convergence club comprises only one province.
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Bibliographic InfoPaper provided by University of Pretoria, Department of Economics in its series Working Papers with number 201322.
Length: 18 pages
Date of creation: May 2013
Date of revision:
House prices; law of one price; panel; convergence;
Find related papers by JEL classification:
- C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Longitudinal Data; Spatial Time Series
- R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Production Analysis, and Firm Location - - - Housing Supply and Markets
This paper has been announced in the following NEP Reports:
- NEP-AFR-2013-05-22 (Africa)
- NEP-ALL-2013-05-22 (All new papers)
- NEP-URE-2013-05-22 (Urban & Real Estate Economics)
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