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The Paris Residential Market: Driving Factors and Market Behaviour 1973-2001

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In this paper we investigate the driving factors associated with the Paris apartment market. We explore a database of nearly 230 000 transactions for residential properties in the Paris area over the 1973 – 2001 period. We develop a factorial model that may capture the systematic link between residential prices and a set of predefined economic variables or a linear combination of these economic variables. We assume that capital growth rates in real estate are related to the variables we defined in the last paragraph. We measure this link which underlines the ‘true path’ of the real estate market: in that way we can develop an index as a function of many other indices. The methodology we develop, based on a multifactor approach to apartment price movements in the long run, has two main advantages over traditional indices. Firstly, we are able to identify the main driving factors for the Paris residential market. And secondly, the factors thus derived can be used to generate a “factor model” useful in comparison to existing capital growth indices and that provides valuable intuition for forecasting residential prices.

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Paper provided by ESSEC Research Center, ESSEC Business School in its series ESSEC Working Papers with number DR 04006.

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Length: 24 pages
Date of creation: May 2004
Handle: RePEc:ebg:essewp:dr-04006
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ESSEC Research Center, BP 105, 95021 Cergy, France

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  1. Brown, Gerald R & Matysiak, George A, 2000. "Sticky Valuations, Aggregation Effects, and Property Indices," The Journal of Real Estate Finance and Economics, Springer, vol. 20(1), pages 49-66, January.
  2. David C. Ling & Andy Naranjo & M. Nimalendran, 2000. "Estimating Returns on Commercial Real Estate: A New Methodology Using Latent-Variable Models," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 28(2), pages 205-231.
  3. David Genesove & Christopher Mayer, 2001. "Loss Aversion and Seller Behavior: Evidence from the Housing Market," The Quarterly Journal of Economics, Oxford University Press, vol. 116(4), pages 1233-1260.
  4. N/A, 1991. "Appraisal," National Institute Economic Review, National Institute of Economic and Social Research, vol. 138(1), pages 3-5, November.
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