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Residential Property Prices in Central, Eastern and Southeastern European Countries

  • Antje Hildebrandt

    ()

    (Oesterreichische Nationalbank, Foreign Research Division)

  • Duy T. Huynh-Olesen

    ()

    (European Central Bank, EU Countries Division)

  • Katharina Steiner

    ()

    (Oesterreichische Nationalbank, Foreign Research Division)

  • Karin Wagner

    ()

    (Oesterreichische Nationalbank, Economic Analysis Division)

Registered author(s):

    The large movements in residential property prices in emerging markets observed over the past decade have raised interest in housing market developments. Within a cointegration framework applied to an unbalanced panel, we assess the relationship between residential property price developments, economic fundamentals and transition-specific factors in Central, Eastern and Southeastern European (CESEE) EU countries from 1999 to 2011.2 Our results show that demand-side fundamentals (disposable income, population, interest rates) and transition-specific factors related to housing demand (such as funding through remittances and credit growth) as well as construction costs on the supply side have been particularly important in residential property price movements. Nevertheless, these factors cannot fully explain residential property price movements, i.e. we find evidence that house prices moved above the level indicated by those factors in the years preceding the crisis. The sharp correction of residential property prices that took place following the outbreak of the financial crisis reversed these overshoots and brought house prices back to – and in some countries even below – the level indicated by the explanatory factors. This suggests that residential property prices are likely to rebound somewhat when economic conditions improve.

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    File URL: http://www.oenb.at/dms/oenb/Publikationen/Volkswirtschaft/Focus-on-European-Economic-Integration/2013/Focus-on-European-Economic-Integration-Q2-13/chapters/feei_2013_q2_studies_huynh_tcm16-255713.pdf
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    Article provided by Oesterreichische Nationalbank (Austrian Central Bank) in its journal Focus on European Economic Integration.

    Volume (Year): (2013)
    Issue (Month): 2 ()
    Pages: 52-76

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    Handle: RePEc:onb:oenbfi:y:2013:i:2:b:1
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    1. Paul van den Noord, 2003. "Tax Incentives and House Price Volatility in the Euro Area: Theory and Evidence," OECD Economics Department Working Papers 356, OECD Publishing.
    2. Balazs Egert & Dubravko Mihaljek, 2007. "Determinants of House Prices in Central and Eastern Europe," William Davidson Institute Working Papers Series wp894, William Davidson Institute at the University of Michigan.
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    14. Antje Hildebrandt & Reiner Martin & Katharina Steiner & Karin Wagner, 2012. "Residential Property Markets in CESEE EU Member States," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue 1, pages 8-30.
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