Relationship between House Prices and Inflation in South Africa: An ARDL Approach
This paper investigates the long-run impact of inflation on homeowner equity in South Africa by analysing the relationship between house prices and the prices of non-housing goods and services. Quarterly data series are collected for the luxury, large middle-segment, medium middle-segment, small middle-segment and the entire middle segment of house prices, as well as, the consumer price index excluding housing costs for the period 1970:Q1–2011:Q1. Based on autoregressive distributed lag (ARDL) models, the empirical results indicate long-run cointegration between the house prices of all the segments and the consumer price index excluding housing costs. Moreover, the long-run elasticity of house prices with respect to prices of non-housing goods and services, i.e., the Fisher coefficient is greater than one for the luxury segment, virtually equal to one for the small middle-segment, and less than one for the large and medium middle-segments, as well as the affordable segments. More importantly though, the estimated Fisher coefficients are not statistically different from unity – a result consistent with the proposed theoretical framework relating housing prices and consumer prices excluding housing expenditure. In general, we infer that house prices in South Africa provide a stable, but quantitatively minor, inflation hedge in the long-run.
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- Rangan Gupta & Sonali Das, 2008.
"Spatial Bayesian Methods of Forecasting House Prices in Six Metropolitan Areas of South Africa,"
200813, University of Pretoria, Department of Economics.
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- Gupta, Rangan & Jurgilas, Marius & Kabundi, Alain, 2010.
"The effect of monetary policy on real house price growth in South Africa: A factor-augmented vector autoregression (FAVAR) approach,"
Elsevier, vol. 27(1), pages 315-323, January.
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"Convergence Of Metropolitan House Prices In South Africa: A Re-Examination Using Efficient Unit Root Tests,"
Applied Econometrics and International Development,
Euro-American Association of Economic Development, vol. 10(1).
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Elsevier, vol. 28(3), pages 891-899, May.
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200831, University of Pretoria, Department of Economics.
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- Sonali Das & Rangan Gupta & Patrick T Kanda, 2010. "Bubbles in South African House Prices and their Impact on Consumption," Working Papers 201017, University of Pretoria, Department of Economics.
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