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Macroeconomic Influences on Cyprus House Prices: 2006Q1- 2014Q2

Author

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  • Petros Sivitanides

    (Department of Real Estate Valuation and Development, Neapolis University Paphos)

Abstract

This paper attempts to explain the determinants of intertemporal variations in housing prices in Cyprus over the last nine years. The analysis focuses on explaining quarterly percentage changes in the House Price Index published by the Central Bank of Cyprus. After estimating several alternative specifications we were able to explain about 70% of the quarterly percentage changes in Cyprus house prices. Our findings indicate that nominal GDP per capita, and, alternatively, nominal GDP, have the largest impact on prices followed by construction costs and the number of households. Interest rates were found to have the smallest effect. The results provide also indications of an asymmetric effect of GDP on house prices before and after the Lehman Brothers collapse. We believe that the considerably stronger effect of GDP on house prices during the pre-crisis period was due to the abundance of both equity and debt capital for house purchases.

Suggested Citation

  • Petros Sivitanides, 2015. "Macroeconomic Influences on Cyprus House Prices: 2006Q1- 2014Q2," Cyprus Economic Policy Review, University of Cyprus, Economics Research Centre, vol. 9(1), pages 3-22, June.
    • Handle: RePEc:erc:cypepr:v:9:y:2015:i:1:p:3-22
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    File URL: https://www.ucy.ac.cy/erc/documents/Sivitanides_3-21.pdf
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    References listed on IDEAS

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    Cited by:

    1. Alola, Andrew & Asongu, Simplice & Alola, Uju, 2019. "House prices and tourism development in Cyprus: A contemporary perspective," MPRA Paper 101795, University Library of Munich, Germany.
    2. Nektarios A. Michail & George Thucydides, 2019. "The impact of foreign demand on Cyprus house prices," Cyprus Economic Policy Review, University of Cyprus, Economics Research Centre, vol. 13(2), pages 48-71, December.
    3. Lena T. Cleanthous & Elena C. Eracleous & Nektarios A. Michail, 2019. "Credit, House Prices and the Macroeconomy in Cyprus," South-Eastern Europe Journal of Economics, Association of Economic Universities of South and Eastern Europe and the Black Sea Region, vol. 17(1), pages 33-55.
    4. Christos S. Savva & Nektarios A. Michail, 2017. "Modelling house price volatility states in Cyprus with switching ARCH models," Cyprus Economic Policy Review, University of Cyprus, Economics Research Centre, vol. 11(1), pages 69-82, June.
    5. Christos S. Savva, 2015. "House Price Dynamics and the Reaction to Macroeconomic Changes: The Case of Cyprus," Cyprus Economic Policy Review, University of Cyprus, Economics Research Centre, vol. 9(2), pages 79-90, December.

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