IDEAS home Printed from https://ideas.repec.org/p/oec/ecoaaa/488-en.html
   My bibliography  Save this paper

Are House Prices Nearing a Peak?: A Probit Analysis for 17 OECD Countries

Author

Abstract

House prices have been moving up strongly in real terms since the mid-1990s in the majority of OECD countries, with the ongoing upswing the longest of its kind in the OECD area since the 1970s. If interest rates were to rise significantly, real house prices may be at risk of nearing a peak. The historical record suggests that the subsequent drops in prices in real terms might be large and that the process could be protracted. To quantify the probability that a peak is nearing in the current situation a probit model was estimated for the period 1970-2005 on a restricted set of what are generally agreed to be the main explanatory variables. Aside from interest rates, these include measures of overheating, such as the gap between real house prices and their long-run trend and the rate of change in real house prices in the recent past. The main finding is that an increase in interest rates by about 1 to 2 percentage points would result in probabilities of a peak nearing of 50% or more in the United States, France, Denmark, Ireland, New Zealand, Spain and Sweden. La hausse des prix des logements touche-t-elle à son terme ? : Une analyse probit pour 17 pays de l'OCDE Les prix des logements ont fortement augmenté en termes réels depuis le milieu des années 90 dans la majorité des pays de l'OCDE, et leur augmentation actuelle est la plus longue que la zone OCDE ait connue depuis les années 70. Si les taux d.intérêt venaient à augmenter ensiblement, la progression des prix réels des logements pourrait toucher à sa fin. Les évolutions passées donnent à penser que les baisses de prix qui s'ensuivraient pourraient être importantes en termes réels et que le processus d'ajustement pourrait durer un certain temps. Pour mesurer la probabilité que les prix cessent d'augmenter dans la situation actuelle, un modèle probit a été estimé sur la période 1970-2005 pour un ensemble restreint de ce que l'on considère en général comme les principales variables explicatives. En plus des taux d'intérêt, ces variables comprennent des indicateurs de surchauffe, comme l'écart entre les prix réels des logements et leur tendance de long terme, ainsi que le taux de variation des prix réels des logements au cours de la période récente. L'analyse démontre qu.une hausse de 1 ou 2 points des taux d.intérêt ferait passer à 50 % ou plus la probabilité d'un retournement du marché aux États-Unis, en France, au Danemark, en Irlande, en Nouvelle-Zélande, en Espagne et en Suède.

Suggested Citation

  • Oecd, 2006. "Are House Prices Nearing a Peak?: A Probit Analysis for 17 OECD Countries," OECD Economics Department Working Papers 488, OECD Publishing.
  • Handle: RePEc:oec:ecoaaa:488-en
    as

    Download full text from publisher

    File URL: http://dx.doi.org/10.1787/816770752416
    Download Restriction: no

    References listed on IDEAS

    as
    1. Alfonso Arpaia & Giuseppe Carone, 2004. "Do labour taxes (and their composition) affect wages in the short and in the long run?," Public Economics 0411004, EconWPA.
    2. Isabelle Joumard, 2003. "Tax systems in European Union countries," OECD Economic Studies, OECD Publishing, vol. 2002(1), pages 91-151.
    3. Kwang-Yeol Yoo, 2003. "Corporate Taxation of Foreign Direct Investment Income 1991-2001," OECD Economics Department Working Papers 365, OECD Publishing.
    4. Francesco Daveri & Guido Tabellini, 2000. "Unemployment, growth and taxation in industrial countries," Economic Policy, CEPR;CES;MSH, vol. 15(30), pages 47-104, April.
    5. Katrin Millock & Céline Nauges & Thomas Sterner, 2004. "Environmental Taxes: A Comparison of French and Swedish Experience from Taxes on Industrial Air Pollution," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 2(1), pages 30-34, 04.
    6. Calmfors, L. & Nymoen, R., 1990. "Real Wage Adjustment And Employment Policies In The Nordic Countries," Papers 461, Stockholm - International Economic Studies.
    7. Laurent Flochel & Thierry Madies, 2002. "Interjurisdictional Tax Competition in a Federal System of Overlapping Revenue Maximizing Governments," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 9(2), pages 121-141, March.
    8. Alfonso Arpaia & Giuseppe Carone, 2004. "Do labour taxes (and their composition) affect wages in the short and the long run? - Alfonso Arpaia and Giuseppe Carone," European Economy - Economic Papers 2008 - 2015 216, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    9. Ann Vourc'h & Patrick Lenain, 2001. "Comment encourager une croissance écologiquement durable en France ?," OECD Economics Department Working Papers 314, OECD Publishing.
    10. Willi Leibfritz & John Thornton & Alexandra Bibbee, 1997. "Taxation and Economic Performance," OECD Economics Department Working Papers 176, OECD Publishing.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Gwinner, William B. & Sanders, Anthony, 2008. "The sub prime crisis : implications for emerging markets," Policy Research Working Paper Series 4726, The World Bank.
    2. Elizabeth Steiner, 2010. "Estimating a Stock-Flow Model for the Swiss Housing Market," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 146(III), pages 601-627, September.
    3. Rose Cunningham & Ilan Kolet, 2007. "Housing Market Cycles and Duration Dependence in the United States and Canada," Staff Working Papers 07-2, Bank of Canada.
    4. Christian Hott & Pierre Monnin, 2008. "Fundamental Real Estate Prices: An Empirical Estimation with International Data," The Journal of Real Estate Finance and Economics, Springer, vol. 36(4), pages 427-450, May.
    5. Michal Hlavacek & Lubos Komarek, 2009. "Housing Price Bubbles and their Determinants in the Czech Republic and its Regions," Working Papers 2009/12, Czech National Bank, Research Department.
    6. R. Calcagno & E. Fornero & M. Rossi, 2009. "The Effect of House Prices on Household Consumption in Italy," The Journal of Real Estate Finance and Economics, Springer, vol. 39(3), pages 284-300, October.
    7. Bracke, Philippe, 2013. "How long do housing cycles last? A duration analysis for 19 OECD countries," Journal of Housing Economics, Elsevier, vol. 22(3), pages 213-230.
    8. Agustín S. Bénétrix & Barry Eichengreen & Kevin H. O'Rourke, 2012. "How housing slumps end," Economic Policy, CEPR;CES;MSH, vol. 27(72), pages 647-692, October.
    9. Edward E. Leamer, 2007. "Housing is the business cycle," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 149-233.
    10. Simplice A. Asongu, 2013. "Fighting consumer price inflation in Africa: What do dynamics in money, credit, efficiency and size tell us?," Journal of Financial Economic Policy, Emerald Group Publishing, vol. 5(1), pages 39-60, April.
    11. Kazumasa Iwata, 2007. "Housing and monetary policy in Japan," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 445-461.
    12. Saumitra, Bhaduri & Raja, Sethudurai, 2012. "A note on excess money growth and inflation dynamics: evidence from threshold regression," MPRA Paper 38036, University Library of Munich, Germany.
    13. Barbara Roffia & Andrea Zaghini, 2007. "Excess Money Growth and Inflation Dynamics," International Finance, Wiley Blackwell, vol. 10(3), pages 241-280, December.
    14. Leamer Edward E, 2009. "Homes and Cars: Why are the Cycles in Homes and Consumer Durables so Similar?," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 9(3), pages 1-66, March.
    15. Ahrend, Rudiger, 2010. "Monetary ease: A factor behind financial crises? Some evidence from OECD countries," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy (IfW), vol. 4, pages 1-30.

    More about this item

    Keywords

    business cycles; cycles conjoncturels; financial markets; house prices; marchés financiers; prix des logements;

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:oec:ecoaaa:488-en. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (). General contact details of provider: http://edirc.repec.org/data/edoecfr.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.