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Macro and micro drivers of house price dynamics: An application to Dutch data


  • Gabriele Galati
  • Federica Teppa
  • Rob Alessie


What is the role of micro and macro factors in determining house prices? We address this question empirically by analysing survey data on housing and mortgages from the DNB Household Survey for the period 1993-2009. We focus on the determinants of house owners' subjective assessment of the value of their house. We highlight three main findings. First, subjective house prices are strongly related to household-specific and house-specific factors, including year of construction, cohort, education level, income and wealth. Financing conditions - in particular the presence of a mortgage as well as the mortgage type, and the mortgage rate - play an important role. Second, we find that macro variables such as the long-term interest rate also influence to an important extent how households value their home. Third, there is evidence of "well behaved" dynamics of subjective house prices, both in terms of persistence and in terms of mean reversion, indicating that house prices tend to converge to their long run equilibrium value. Finally, our findings support a certain degree of heterogeneity and segmentation in subjective house prices, especially along the dimensions of geographical region and degree of urbanization, funding conditions, and income expectations.

Suggested Citation

  • Gabriele Galati & Federica Teppa & Rob Alessie, 2011. "Macro and micro drivers of house price dynamics: An application to Dutch data," DNB Working Papers 288, Netherlands Central Bank, Research Department.
  • Handle: RePEc:dnb:dnbwpp:288

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    References listed on IDEAS

    1. Oriol Aspachs-Bracons & Pau Rabanal, 2010. "The drivers of housing cycles in Spain," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 1(1), pages 101-130, March.
    2. Gonzalez-Navarro, Marco & Quintana-Domeque, Climent, 2009. "The reliability of self-reported home values in a developing country context," Journal of Housing Economics, Elsevier, vol. 18(4), pages 311-324, December.
    3. Darracq Pariès, Matthieu & Notarpietro, Alessandro, 2008. "Monetary policy and housing prices in an estimated DSGE for the US and the euro area," Working Paper Series 972, European Central Bank.
    4. Luci Ellis & Laura Berger-Thomson, 2004. "Housing Construction Cycles and Interest Rates," Econometric Society 2004 Australasian Meetings 335, Econometric Society.
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    Cited by:

    1. Carin van der Cruijsen & David-Jan Jansen & Maarten van Rooij, 2014. "The rose-colored glasses of homeowners," DNB Working Papers 421, Netherlands Central Bank, Research Department.
    2. David-Jan Jansen, 2016. "Housing and mortgage dynamics: evidence from household surveys," DNB Working Papers 522, Netherlands Central Bank, Research Department.

    More about this item


    House prices; survey data; panel analysis;

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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