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Detecting house price bubbles in G7 countries: New evidence and heterogeneous determinants

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  • Zhang, Xiaoming
  • Zhu, Mengqing
  • Tian, Yiming
  • Zedda, Stefano

Abstract

In recent years, the high growth of house prices in G7 countries has attracted some attention from all sectors due to the role of the real estate bubble in the global financial crisis of 2008. In this research, we analyzed the house price bubbles and their determinants in G7 countries. Firstly, we detected multiple house price bubbles in G7 countries between 1970 and 2022 and located when the house price bubbles emerged and burst. Second, we investigated the determinants of house price bubbles in each country and in the G7 countries as a whole. The results show that the level of house price bubbles and their determinants is significantly diversified over countries. However, total population, size of private debt, GDP per capita, and urbanization are among the common drivers of the whole G7 countries. Based on these results, we provide some suggestions on the critical points for a stable real estate market development.

Suggested Citation

  • Zhang, Xiaoming & Zhu, Mengqing & Tian, Yiming & Zedda, Stefano, 2024. "Detecting house price bubbles in G7 countries: New evidence and heterogeneous determinants," Finance Research Letters, Elsevier, vol. 69(PA).
    • Handle: RePEc:eee:finlet:v:69:y:2024:i:pa:s154461232401136x
    DOI: 10.1016/j.frl.2024.106107
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    References listed on IDEAS

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    1. Peter C. B. Phillips & Shuping Shi & Jun Yu, 2015. "Testing For Multiple Bubbles: Historical Episodes Of Exuberance And Collapse In The S&P 500," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 56(4), pages 1043-1078, November.
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    4. Peter C. B. Phillips & Shuping Shi & Jun Yu, 2015. "Testing For Multiple Bubbles: Historical Episodes Of Exuberance And Collapse In The S&P 500," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 56, pages 1043-1078, November.
    5. Malik M Asad Saleem & Zafar Muhammad & Ullah Saif & Ullah Atta, 2021. "Role of Behavioral Biases in Real Estate Prices in Pakistan," Real Estate Management and Valuation, Sciendo, vol. 29(1), pages 41-53, March.
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    Keywords

    G7; House price bubbles; GSADF; BSADF; Ordered logit model;
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