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Housing Price Bubbles and their Determinants in the Czech Republic and its Regions

  • Michal Hlavacek
  • Lubos Komarek

This working paper, based on an empirical analysis, discusses factors affecting property prices and tries to identify periods of property price overvaluation by three approaches: using simple ratios related to house prices (price-to-income and price-to-rent), using time series analysis for the Czech Republic as a whole, and using panel regression for the Czech regions. The time series analysis and the simple indicators of housing price sustainability identified overvalued property prices in 2002/2003 and partly also in 2007/2008. According to the time series analysis, however, the size of the housing price overvaluation in 2007/2008 was relatively low, as the rise in property prices in this period was largely explainable by fundamentals. From the regional perspective, there is a higher degree of overvaluation in regions with higher property prices. The exception is Prague, which seems to be a “specific†region.

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Paper provided by Czech National Bank, Research Department in its series Working Papers with number 2009/12.

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Date of creation: Dec 2009
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Handle: RePEc:cnb:wpaper:2009/12
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