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The cyclical position of housing prices – a VECM approach for Hungary

Author

Listed:
  • Tamás Berki

    (Magyar Nemzeti Bank (Central Bank of Hungary))

  • Tibor Szendrei

    (Magyar Nemzeti Bank (Central Bank of Hungary))

Abstract

This paper aims to estimate a long-term equilibrium price level for the Hungarian housing market by identifying key underlying macroeconomic factors. For this, in line with the empirical literature, a vector error correction model is employed. The housing market price level is mapped by the newly established MNB housing price index. The results establish one stable cointegrating relationship between the housing prices and its longterm driving factors: average new housing loans, disposable income and housing stock. Credit channel plays a decisive role in determining equilibrium level of housing prices. Housing prices exhibit overshooting to various shocks potentially due to the protracted supply side adjustment. Due to the short sample size the estimated price gap might be underestimated in magnitude; nevertheless the fairly slow price adjustment coefficient ensures a persistent gap. Therefore, the sign of the estimated price gap is informative for policy makers from a macroprudential perspective.

Suggested Citation

  • Tamás Berki & Tibor Szendrei, 2017. "The cyclical position of housing prices – a VECM approach for Hungary," MNB Occasional Papers 2017/126, Magyar Nemzeti Bank (Central Bank of Hungary).
    • Handle: RePEc:mnb:opaper:2017/126
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    File URL: https://www.mnb.hu/letoltes/mnb-op-126-final.pdf
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    References listed on IDEAS

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    9. repec:mnb:ecbook:2006 is not listed on IDEAS
    10. Boris Hofmann, 2003. "Bank Lending and Property Prices: Some International Evidence," Working Papers 222003, Hong Kong Institute for Monetary Research.
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    Cited by:

    1. Eyno Rots, 2018. "Business, Housing, and Credit Cycles – The Case of Hungary," Financial and Economic Review, Magyar Nemzeti Bank (Central Bank of Hungary), vol. 17(4), pages 5-22.
    2. Sara Ferreira Filipe, 2018. "Housing prices and mortgage credit in Luxembourg," BCL working papers 117, Central Bank of Luxembourg.

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    More about this item

    Keywords

    housing prices; VECM; error correction; housing loans; cyclical position;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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