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What Drives Housing Prices Down? Evidence from an International Panel

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  • Kholodilin Konstantin A.

    () (DIW Berlin, Mohrenstrasse 58, 10117 Berlin, Germany)

  • Menz Jan-Oliver

    () (University of Hamburg, Department Economics and Politics, Von-Melle-Park 9, 20146, Hamburg, Germany)

  • Siliverstovs Boriss

    () (ETH Zurich, KOF Swiss Economic Institute, Weinbergstrasse 35, 8092 Zurich, Switzerland)

Abstract

In this study, we suggest an explanation for the low growth rates of real housing prices in Canada and Germany in comparison to other OECD countries over the period 1975-2005. We show that the long-run development of housing markets is determined by real disposable per-capita income, the real long-term interest rate, population growth, and urbanization. The differential development of real housing prices in Canada and Germany is attributed to the fundamentals in these two countries. Canada and Germany are characterized by relatively low average growth rates of real disposable income and relatively high interest rates, resulting in depressed housing prices over a long period of time. Institutional structure accentuates these tendencies. Given the importance of housing wealth for private consumption, our paper aims at drawing the attention of policymakers to the necessity of preventing not only overheating but also overcooling of the housing market that entails lower economic growth rate.

Suggested Citation

  • Kholodilin Konstantin A. & Menz Jan-Oliver & Siliverstovs Boriss, 2010. "What Drives Housing Prices Down? Evidence from an International Panel," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 230(1), pages 59-76, February.
  • Handle: RePEc:jns:jbstat:v:230:y:2010:i:1:p:59-76
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    Cited by:

    1. Samya Beidas-Strom & Weicheng Lian & Ashwaq Maseeh, 2009. "The Housing Cycle in Emerging Middle Eastern Economies and its Macroeconomic Policy Implications," IMF Working Papers 09/288, International Monetary Fund.
    2. Stefan Kooths & Matthias Rieger, 2008. "Caught in the US Subprime Meltdown 2007/2008: Germany Loses Its Wallet but Escapes Major Harm," Discussion Papers of DIW Berlin 825, DIW Berlin, German Institute for Economic Research.
    3. Konstantin A. Kholodilin & Andreas Mense, 2012. "Internet-Based Hedonic Indices of Rents and Prices for Flats: Example of Berlin," Discussion Papers of DIW Berlin 1191, DIW Berlin, German Institute for Economic Research.
    4. Karaman Örsal, Deniz Dilan, 2014. "Do the global stochastic trends drive the real house prices in OECD countries?," Economics Letters, Elsevier, vol. 123(1), pages 9-13.
    5. Christian Dreger & Konstantin A. Kholodilin, 2011. "An Early Warning System to Predict the House Price Bubbles," Discussion Papers of DIW Berlin 1142, DIW Berlin, German Institute for Economic Research.
    6. repec:eee:jhouse:v:37:y:2017:i:c:p:1-21 is not listed on IDEAS
    7. Antje Hildebrandt & Duy T. Huynh-Olesen & Katharina Steiner & Karin Wagner, 2013. "Residential Property Prices in Central, Eastern and Southeastern European Countries," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), pages 52-76.
    8. Konstantin A. Kholodilin & Andreas Mense, 2011. "Can Internet Ads Serve as an Indicator of Homeownership Rates?," Discussion Papers of DIW Berlin 1168, DIW Berlin, German Institute for Economic Research.
    9. Dreger, Christian & Kholodilin, Konstantin A., 2013. "An early warning system to predict speculative house price bubbles," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy (IfW), vol. 7, pages 1-26.
    10. Dreger, Christian & Kholodilin, Konstantin A., 2012. "An early warning system to predict the speculative house price bubbles," Economics Discussion Papers 2012-44, Kiel Institute for the World Economy (IfW).
    11. Koetter, Michael & Poghosyan, Tigran, 2010. "Real estate prices and bank stability," Journal of Banking & Finance, Elsevier, vol. 34(6), pages 1129-1138, June.

    More about this item

    Keywords

    House prices; dynamic panel data; co-integration;

    JEL classification:

    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation

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