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Title:What drives housing prices down? Evidence from an international panel PDF Logo
Authors:Kholodilin, Konstantin Arkadievich
Menz, Jan-Oliver
Siliverstovs, Boriss
Issue Date:2007
Series/Report no.:Discussion papers // German Institute for Economic Research 758
Abstract:In this study, we suggest an explanation for the alarmingly low growth rates of real housing prices in Canada and Germany in comparison to other OECD countries over 1975-2005. We show that the long-run development of housing markets is determined by real disposable per capita income, real long-term interest rate, population growth, and urbanization. The differential development of real housing prices in Canada and Germany is attributed to the specific values of the fundamentals in these two countries. Canada and Germany are characterized by relatively low average growth rates of real disposable income and relatively high interest rates resulting in suppressed housing prices over long period of time. Institutional structure accentuates these tendencies. Given the importance of housing wealth for the private consumption, our paper aims at drawing attention of the policymakers to the necessity of preventing not only the overheating but also overcooling of the housing market that entails lower economic growth rate.
Subjects:house prices
dynamic panel data
cointegration
JEL:E30
C23
C51
Document Type:Working Paper
Appears in Collections:DIW-Diskussionspapiere
Publikationen von Forscherinnen und Forschern des DIW

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