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Regional Analysis of Housing Price Bubbles and Their Determinants in the Czech Republic

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Abstract

In this article we focus on factors affecting property prices in the Czech regions. We apply an empirical analysis to identify periods of property price overvaluation by three alternative approaches: using ratios related to house prices (price-to-income and price-to-rent), using simple analysis of time trends in regional dimension (HP filter) and using panel regression. The analysis identified overvalued property prices in 2002/2003 and partly also in 2007/2008. Compared to simple HP filters in the panel regression the size of the housing price overvaluation in 2007/2008 was relatively low, as the rise in property prices in this period was largely determined by fundamentals. Looking across individual region, there is apparent tendency for higher degree of overvaluation in regions with higher property prices. The only exception from this rule is Prague, which, as a capital city, seems to have many “specific” features.

Suggested Citation

  • Michal Hlaváèek & Luboš Komárek, 2011. "Regional Analysis of Housing Price Bubbles and Their Determinants in the Czech Republic," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 61(1), pages 67-91, January.
    • Handle: RePEc:fau:fauart:v:61:y:2011:i:1:p:67-91
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    Citations

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    Cited by:

    1. Ansgar Belke & Jonas Keil, 2018. "Fundamental Determinants of Real Estate Prices: A Panel Study of German Regions," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 24(1), pages 25-45, February.
    2. Daniel Pakši & Jakub Vontroba & Milan Šimek, 2023. "Regional Migration in the Czech Republic: Economic Factors Are the Key," Politická ekonomie, Prague University of Economics and Business, vol. 2023(3), pages 267-290.
    3. Havranek, Tomas & Irsova, Zuzana & Lesanovska, Jitka, 2016. "Bank efficiency and interest rate pass-through: Evidence from Czech loan products," Economic Modelling, Elsevier, vol. 54(C), pages 153-169.
    4. Hana Hejlová & Michal Hlaváček & Luboš Komárek, . "A Comprehensive Method for House Price Sustainability Assessment in the Czech Republic," Prague Economic Papers, University of Economics, Prague, vol. 0, pages 1-17.
    5. repec:cnb:ocpubv:rb12/2 is not listed on IDEAS
    6. repec:cnb:ocpubv:rb11/2 is not listed on IDEAS
    7. repec:cnb:ocpubv:rb09/2 is not listed on IDEAS
    8. repec:cnb:ocpubv:rb10/2 is not listed on IDEAS
    9. Miroslav Plašil & Jakub Seidler & Petr Hlaváč, 2016. "A New Measure of the Financial Cycle: Application to the Czech Republic," Eastern European Economics, Taylor & Francis Journals, vol. 54(4), pages 296-318, July.
    10. David Mazáček & Jiří Panoš, 2022. "Key determinants of new residential real estate prices in Prague," FFA Working Papers 5.002, Prague University of Economics and Business, revised 11 Apr 2023.
    11. Jan Bruha & Jiri Polansky, 2014. "The Housing Sector over Business Cycles: Empirical Analysis and DSGE Modelling," Working Papers 2014/12, Czech National Bank.
    12. Daniel Pakši & Jakub Vontroba & Milan Šimek, . "Regional Migration in the Czech Republic: Economic Factors Are the Key," Politická ekonomie, Prague University of Economics and Business, vol. 0.
    13. repec:cnb:ocpubv:rb12/1 is not listed on IDEAS
    14. repec:cnb:ocpubv:rb11/1 is not listed on IDEAS

    More about this item

    Keywords

    housing prices; housing bubbles; misalignment; panel data; Czech Republic;
    All these keywords.

    JEL classification:

    • C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables
    • 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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