Asymmetric Behaviour in Nominal and Real Housing Prices: Evidence from Advanced and Emerging Economies

This paper investigates asymmetry in nominal and real housing price series from 31 advanced and emerging economies using the nonparametric Triples test (Randles et al., 1980), which allows identifying different types of asymmetries in economic cycles. The data sample starts in the 1970s for most of the advanced economies, but is generally shorter for the emerging economies. Both nominal and inflation-adjusted series are examined to allow distinguishing asymmetries in real housing price cycles from those related to nominal rigidities. We find that nominal prices reach peaks faster than troughs (positive steepness asymmetry) in more than half of the advanced economies, suggesting the presence of nominal rigidities. Weaker evidence of asymmetry is found among the emerging economies. Regarding real housing prices, our main finding is that peaks are higher than troughs are deep (positive deepness asymmetry) in half of the advanced economies, suggesting the presence of price overshooting during booms. Again, evidence is less clear for the emerging economies. Overall, asymmetries are found in many economies, both for nominal and real housing prices, which calls for considering potential non-linearity when analysing, modelling and forecasting housing prices.