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Don’t Look Up: House Prices in Emerging Europe

Author

Listed:
  • Cevik Serhan

    (International Monetary Fund, Washington, DC, USA)

  • Naik Sadhna

    (International Monetary Fund, Washington, DC, USA)

Abstract

This paper investigates how housing prices respond to economic, financial and demographic conditions in emerging markets in Europe. We use quarterly data covering 10 countries over the period 1998–2022 and implement a panel quantile regression approach to obtain a granular analysis of real estate markets. Overall, economic, financial and demographic developments explain real house price growth in emerging Europe, with income growth having the most significant impact. Quantile regression estimations show that income growth matters more for higher quantiles of the property market. We also find that an increase in short-term or long-term interest rates has a price-dampening impact, indicating that a higher cost of borrowing is associated with lower real house price growth. These results indicate that the downturn in house prices could deepen with the looming economic recession and soaring interest rates.

Suggested Citation

  • Cevik Serhan & Naik Sadhna, 2023. "Don’t Look Up: House Prices in Emerging Europe," German Economic Review, De Gruyter, vol. 24(4), pages 411-436, December.
    • Handle: RePEc:bpj:germec:v:24:y:2023:i:4:p:411-436:n:4
    DOI: 10.1515/ger-2023-0015
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    Keywords

    house prices; quantile regression; instrumental variable; emerging markets; Europe;
    All these keywords.

    JEL classification:

    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • E39 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Other
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • P25 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Urban, Rural, and Regional Economics
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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