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Links between housing and real economy in the euro area

Author

Listed:
  • Bořek Vašíček
  • Václav Žďárek

Abstract

Housing represents a large share of household wealth and housing market developments are of high importance for the overall economy. Since 2014, house prices have increased across the euro area and accelerated further since the COVID-19 pandemic. This article analyses the links between GDP, residential construction, lending rates, mortgage credit and house prices in the euro area, and tests the impact of macroprudential and monetary policy on housing markets. The empirical results confirm that there are strong links between the housing market and the real economy at euro area level. The differences in these links across Member States can, at least in part, be related to different degrees of elasticity of the housing supply. The results also found that both macroprudential and monetary tools have a significant impact on house prices and on mortgage credit in the euro area.

Suggested Citation

  • Bořek Vašíček & Václav Žďárek, 2022. "Links between housing and real economy in the euro area," Quarterly Report on the Euro Area (QREA), Directorate General Economic and Financial Affairs (DG ECFIN), European Commission, vol. 21(3), pages 19-28, November.
    • Handle: RePEc:euf:qreuro:0213-02
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    File URL: https://economy-finance.ec.europa.eu/publications/quarterly-report-euro-area-qrea-vol-21-no-3-2022_en
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