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Convergence in Provincial-Level South African House Prices: Evidence from the Club Convergence and Clustering Procedure

  • Nicholas Apergis

    ()

    (Department of Banking and Financial Management, University of Piraeus, Greece)

  • Beatrice D. Simo-Kengne

    ()

    (Department of Economics, University of Pretoria)

  • Rangan Gupta

    ()

    (Department of Economics, University of Pretoria)

This empirical study analyses the long run behaviour of provincial house prices in South Africa based on the club convergence and clustering procedure of Phillips and Sul (2007). Using quarterly data covering the period of 1974Q1 to 2012Q4, 1976Q2 to 2012Q4, 1974Q1 to 2012 Q4 and 1977Q3 to 2012Q4 for the entire, large, medium and small-middle segments of the housing market, respectively, we test the law of one price across nine provinces. The empirical findings suggest that the nine provinces do not form a homogeneous convergence club. In particular, the aggregate housing market supports the presence of three convergence clubs with the tendency of provinces to converge or diverge varying across subsequent segments. Unlike the middle-small segment which consists of two convergence clubs of seven and two provinces, the middle-large and middle-medium segments are consistent with three convergence clubs corresponding to three segmented independent local markets. The first convergence club consists of four and five provinces, respectively. The second convergence club is made of four and three provinces, respectively, while the third convergence club comprises only one province.

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Paper provided by University of Pretoria, Department of Economics in its series Working Papers with number 201322.

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Length: 18 pages
Date of creation: May 2013
Date of revision:
Handle: RePEc:pre:wpaper:201322
Contact details of provider: Postal: PRETORIA, 0002
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Web page: http://www.up.ac.za/economics

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  1. Holly, Sean & Pesaran, M. Hashem & Yamagata, Takashi, 2010. "A spatio-temporal model of house prices in the USA," Journal of Econometrics, Elsevier, vol. 158(1), pages 160-173, September.
  2. McDonald, Ronald & Taylor, Mark P, 1993. "Regional House Prices in Britain: Long-Run Relationships and Short-Run Dynamics," Scottish Journal of Political Economy, Scottish Economic Society, vol. 40(1), pages 43-55, February.
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  4. Goetzmann, W.N., 1990. "The Single Family Home In The Investment Portfolio," Papers fb-_90-15, Columbia - Graduate School of Business.
  5. Rangan Gupta & Stephen Miller, 2012. "The Time-Series Properties of House Prices: A Case Study of the Southern California Market," The Journal of Real Estate Finance and Economics, Springer, vol. 44(3), pages 339-361, April.
  6. Mehmet Balcilar & Abebe D. Beyene & Rangan Gupta & Monaheng Seleteng, 2011. ""Ripple" Effects in South African House Prices," Working Papers 201102, University of Pretoria, Department of Economics.
  7. Mark J. Holmes & Jesús Otero & Theodore Panagiotidis, 2011. "Investigating Regional House Price Convergence in the United States: Evidence from a Pair-Wise Approach," Working Paper Series 29_11, The Rimini Centre for Economic Analysis.
  8. Peter C.B. Phillips & Donggyu Sul, 2007. "Transition Modeling and Econometric Convergence Tests," Cowles Foundation Discussion Papers 1595, Cowles Foundation for Research in Economics, Yale University.
  9. S. Cook & C. Thomas, 2003. "An alternative approach to examining the ripple effect in UK house prices," Applied Economics Letters, Taylor & Francis Journals, vol. 10(13), pages 849-851.
  10. Mei-Se Chien, 2010. "Structural Breaks and the Convergence of Regional House Prices," The Journal of Real Estate Finance and Economics, Springer, vol. 40(1), pages 77-88, January.
  11. Mark J. Holmes & Arthur Grimes, 2005. "Is there long-run convergence of regional house prices in the UK?," Working Papers 05_11, Motu Economic and Public Policy Research.
  12. Steven Clark & T. Coggin, 2009. "Trends, Cycles and Convergence in U.S. Regional House Prices," The Journal of Real Estate Finance and Economics, Springer, vol. 39(3), pages 264-283, October.
  13. Mark J. Holmes & Arthur Grimes, 2008. "Is There Long-run Convergence among Regional House Prices in the UK?," Urban Studies, Urban Studies Journal Limited, vol. 45(8), pages 1531-1544, July.
  14. Philippe Burger & Lizelle janse Van rensburg, 2008. "Metropolitan House Prices In South Africa: Do They Converge?," South African Journal of Economics, Economic Society of South Africa, vol. 76(2), pages 291-297, 06.
  15. Smith, Lawrence B & Rosen, Kenneth T & Fallis, George, 1988. "Recent Developments in Economic Models of Housing Markets," Journal of Economic Literature, American Economic Association, vol. 26(1), pages 29-64, March.
  16. Nicholas Apergis & James Payne, 2012. "Convergence in U.S. house prices by state: evidence from the club convergence and clustering procedure," Letters in Spatial and Resource Sciences, Springer, vol. 5(2), pages 103-111, July.
  17. Ashworth, John & Parker, Simon C, 1997. "Modelling Regional House Prices in the UK," Scottish Journal of Political Economy, Scottish Economic Society, vol. 44(3), pages 225-46, August.
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