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House price bubbles and systemic events over the last six centuries

Author

Listed:
  • Alona Shmygel
  • Martin Hoesli

Abstract

How many house price bubbles have there been over the last six centuries? And how have house prices responded to different types of systemic events? These two questions are addressed using house price data for Stockholm, Sweden, for the period 1420 to 2021. To answer the first question, we construct two measures to detect house price overvaluation, namely the price-to-income ratio and a fundamental price level for house prices, which is gauged against actual house prices. The second question is answered using local linear projections, with which we test the response of house prices to different types of systemic events, such as epidemics, wars, and financial crises. We check the lag with which house prices react and how long the responses last for different types of systemic events. Additionally, we investigate how the link between house prices and systemic events has changed over time. We find that bubble periods are evenly distributed over time. The price-to-income ratio appears to be sensitive to financial crises, which mostly happened during the 20th century. The influence of other types of systemic events is less straightforward and is time-varying.

Suggested Citation

  • Alona Shmygel & Martin Hoesli, 2024. "House price bubbles and systemic events over the last six centuries," ERES eres2024-105, European Real Estate Society (ERES).
    • Handle: RePEc:arz:wpaper:eres2024-105
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    More about this item

    Keywords

    Financial Crisis; House price bubble; Sweden; Systemic event;
    All these keywords.

    JEL classification:

    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location

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