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European Housing Prices Through the Lens of Trends

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  • Ales Melecky
  • Daniel Paksi

Abstract

We study convergence and club formation of housing prices in European countries using several measures of housing prices. We employ correlations, innovative trend and gap approaches, and cointegration analysis to study the long-term development of housing prices and their reactions to crises. We find that housing prices in European countries do not converge and their development since the creation of the monetary union has differed. The most prominent examples are the differences between Southern European countries heavily affected by the Global Financial Crisis and the rest of the countries. Our analysis reveals several country clubs with similar growth patterns and reaction to crises which do not necessarily follow the traditional division between old and new EU member states. Our findings are in line with the literature, which finds that housing prices in the EU do not converge overall, and housing prices do not co-move in general, but only within smaller subgroups, which may be regionally dispersed.

Suggested Citation

  • Ales Melecky & Daniel Paksi, 2023. "European Housing Prices Through the Lens of Trends," Prague Economic Papers, Prague University of Economics and Business, vol. 2023(5), pages 488-519.
    • Handle: RePEc:prg:jnlpep:v:2023:y:2023:i:5:id:840:p:488-519
    DOI: 10.18267/j.pep.840
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    References listed on IDEAS

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    1. John V. Duca & John Muellbauer & Anthony Murphy, 2011. "House Prices and Credit Constraints: Making Sense of the US Experience," Economic Journal, Royal Economic Society, vol. 121(552), pages 533-551, May.
    2. Ferrara, L. & Koopman, S J., 2010. "Common business and housing market cycles in the Euro area from a multivariate decomposition," Working papers 275, Banque de France.
    3. Cheol Eun & Lingling Wang & Tim Zhang, 2022. "House Price Growth Synchronization and Business Cycle Alignment," The Journal of Real Estate Finance and Economics, Springer, vol. 65(4), pages 675-710, November.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Ales Melecky & Daniel Paksi, 2024. "Drivers of European housing prices in the new millennium: demand, financial, and supply determinants," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 51(3), pages 731-753, August.

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    More about this item

    Keywords

    convergence; correlation; cointegration; EU; housing prices; trends; JEL Codes: E31; G01; R31;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • G01 - Financial Economics - - General - - - Financial Crises
    • 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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