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Estonian Housing Market: Searching for Origins of the Boom

Author

Listed:
  • Ene Kolbre

    (Tallinn School of Economics and Business Administration, Tallinn University of Technology)

  • Angelika Kallakmaa-Kapsta

    (Tallinn School of Economics and Business Administration, Tallinn University of Technology)

  • Taavi Ojala

    (Tallinn School of Economics and Business Administration, Tallinn University of Technology)

Abstract

This paper studies the Estonian housing market, which, being the market with fastest growing prices in CEE, has undergone a rapid growth that has been oft en explained solely by an active convergence process to more advanced European countries. The study seeks to discuss the effects of changes in the economic environment on the Estonian housing market; outline the dynamics of the housing market development and assess this using ratio analysis and the Poterba model. Considering the specific features of the Estonian housing market, the paper further develops the Poterba model. The main question addressed in the study is whether the large price increases in the Estonian housing market can be interpreted as a housing boom. The research results confirm the presence of a price bubble in the housing market, which burst in 2007. The practical and methodological problems identified in the paper might be interesting for people studying similar issues on other emerging markets.

Suggested Citation

  • Ene Kolbre & Angelika Kallakmaa-Kapsta & Taavi Ojala, 2009. "Estonian Housing Market: Searching for Origins of the Boom," Research in Economics and Business: Central and Eastern Europe, Tallinn School of Economics and Business Administration, Tallinn University of Technology, vol. 1(2).
    • Handle: RePEc:ttu:rebcee:20
    as

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    References listed on IDEAS

    as
    1. Ene Kolbre & Angelika Kallakmaa-Kapsta, 2006. "Housing Market Development in Estonia: Is There a Real Estate Boom?," Working Papers 146, Tallinn School of Economics and Business Administration, Tallinn University of Technology.
    2. Bharat Barot & Zan Yang, 2004. "House Prices and Housing Investment in Sweden and the UK. Econometric analysis for the period 1970-1998," Macroeconomics 0409022, University Library of Munich, Germany.
    3. Angelika Kallakmaa-Kapsta & Ene Kolbre & Taavi Ojala, 2006. "Housing Market Development In Estonia: Is There Real Estate Boom Expected?," ERES eres2006_227, European Real Estate Society (ERES).
    4. Ewa Kucharska-Stasiak & George Matysiak, 2004. "The transition of the Polish real estate market within a Central and Eastern European context," ERES eres2004_170, European Real Estate Society (ERES).
    5. François Ortalo-Magné & Sven Rady, 2006. "Housing Market Dynamics: On the Contribution of Income Shocks and Credit Constraints ," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 73(2), pages 459-485.
    6. Tobin, James, 1969. "A General Equilibrium Approach to Monetary Theory," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 1(1), pages 15-29, February.
    7. Joshua Gallin, 2006. "The Long-Run Relationship between House Prices and Income: Evidence from Local Housing Markets," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 34(3), pages 417-438, September.
    8. Mr. Paul Louis Ceriel Hilbers & Ms. Lisbeth S Zacho & Mr. Qin Lei, 2001. "Real Estate Market Developments and Financal Sector Soundness," IMF Working Papers 2001/129, International Monetary Fund.
    9. Malpezzi, Stephen, 1999. "A Simple Error Correction Model of House Prices," Journal of Housing Economics, Elsevier, vol. 8(1), pages 27-62, March.
    10. Kathleen Stephansen & Maxine Koster, 2005. "Housing valuations: no bubble apparent," BIS Papers chapters, in: Bank for International Settlements (ed.), Real estate indicators and financial stability, volume 21, pages 112-23, Bank for International Settlements.
    11. Karl E. Case & Robert J. Shiller, 2003. "Is There a Bubble in the Housing Market?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 34(2), pages 299-362.
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