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House Prices and Bubbles in New Zealand

  • Patricia Fraser

    (University of Aberdeen Business School)

  • Martin Hoesli

    (University of Geneva, HEC, Swiss Finance Institute and University of Aberdeen Business School)

  • Lynn Mc Alevey

    (University of Otago, Department of Finance and Quantitative Analysis)

This paper studies actual (real) house prices relative to fundamental (real) house values in New Zealand for the period 1970-2005. We find disparities between actual and fundamental house prices in the early 1970s and 1980s and from 2000 to date. These deviations are found to be substantially more pronounced than for New Zealand stocks. Contrary to the results that have been reported for many other countries, however, there is no evidence of a deviation in the latter part of the 1980s. Finally,we find that the current deviation of house prices from fundamentals is due to price dynamics rather than an overreaction to fundamentals.

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Paper provided by Swiss Finance Institute in its series Swiss Finance Institute Research Paper Series with number 06-20.

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Length: 38 pages
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Handle: RePEc:chf:rpseri:rp0620
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  29. Angela Black & Patricia Fraser & Martin Hoesli, 2006. "House Prices, Fundamentals and Bubbles," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 33(9-10), pages 1535-1555.
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