Regional House Prices: An Application of a Two Equation Model to the Swedish Housing Market
2008 (English)In: International journal of housing market and analysis, ISSN 1753-8270, Vol. 1, no 1, 33-51 p.Article in journal (Refereed) Published
Purpose – The aim of this study is to investigate why housing prices differ between regions, and toestimate the speed-of-adjustment.Design/methodology/approach – A variety of factors explains the differences in the prices ofsingle-family houses. Changes in disposable income over time and across regions as well as the costof capital are important determinants. The model is based on a DiPasquale and Wheaton modelwhere the developments of the house prices are a function of macroeconomic factors such aseconomic growth, changes in employment and interest rate. It is estimated on a two-equation errorcorrection model: first, the long-run price equation and, second, a short-run price model.Findings – The estimates suggest that the speed-of-adjustment ranges from 16 to 78 per cent(around 50 per cent on average) depending on the region. In regions with a low population density,higher price adjustment rates are observed. Moreover, the speed-of-adjustment is higher in an upturneconomy than in a downturn reflecting that negative housing stock adjustments is much slower thanpositive adjustments.Originality/value – The main contribution is that the speed-of-adjustment to the long-runequilibrium price for 21 regions is estimated instead of at a national level and, furthermore, cyclicalasymmetry in responses is tested and such differences are found. It is estimated that the rate ofadjustment to long-run equilibrium price varies considerably between regions.
Place, publisher, year, edition, pages
2008. Vol. 1, no 1, 33-51 p.
Housing, Prices, Modelling, Sweden
IdentifiersURN: urn:nbn:se:kth:diva-59614OAI: oai:DiVA.org:kth-59614DiVA: diva2:475947
QC 201201132012-01-112012-01-112012-01-13Bibliographically approved