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Crashes in Real Estate Prices: Causes and Predictability

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  • Qin Xiao

    (Business School, University of Aberdeen, S61 Edward Wright Building, Dunbar St, Old Aberdeen, Aberdeen, AB24 3QY, UK, q.xiao@abdn.ac.uk)

Abstract

Large swings in real estate prices that end in devastating crashes have been witnessed by many countries in the past two decades. To curtail the damage of these crashes, it is imperative that we understand their causes. This study proposes a model that associates market crashes with periodically collapsing speculative bubbles. Unlike the conventional literature, the identification of the bubble does not rely on assumptions about fundamentals, but on some ‘fingerprints’ of speculation. These fingerprints, theoretically, may also serve as predictors of market crashes. In practice, however, a number of factors may hinder the accuracy of the prediction.

Suggested Citation

  • Qin Xiao, 2010. "Crashes in Real Estate Prices: Causes and Predictability," Urban Studies, Urban Studies Journal Limited, vol. 47(8), pages 1725-1744, July.
    • Handle: RePEc:sae:urbstu:v:47:y:2010:i:8:p:1725-1744
    DOI: 10.1177/0042098009356482
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    References listed on IDEAS

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    Cited by:

    1. Ogonna Nneji & Chris Brooks & Charles Ward, 2013. "Commercial Real Estate and Equity Market Bubbles: Are They Contagious to REITs?," Urban Studies, Urban Studies Journal Limited, vol. 50(12), pages 2496-2516, September.
    2. An-Ming Wang, 2016. "Agglomeration and simplified housing boom," Urban Studies, Urban Studies Journal Limited, vol. 53(5), pages 936-956, April.
    3. Xiao, Qin & Yan, Meilan & Zhang, Dalu, 2023. "Commodity market financialization, herding and signals: An asymmetric GARCH R-vine copula approach," International Review of Financial Analysis, Elsevier, vol. 89(C).
    4. Xiao, Qin, 2010. "Systemic Stability of Housing and Mortgage Market: From the observable to the unobservable," MPRA Paper 23708, University Library of Munich, Germany.
    5. Yang Yang & Michael Rehm & Mingquan Zhou, 2021. "Housing Price Volatility: What's the Difference between Investment and Owner‐Occupancy?," The Economic Record, The Economic Society of Australia, vol. 97(319), pages 548-563, December.
    6. Honghao Ren & Henk Folmer & Arno Vlist, 2014. "What role does the real estate–construction sector play in China’s regional economy?," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 52(3), pages 839-857, May.

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