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A house prices at risk approach for the German residential real estate market

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  • Hafemann, Lucas

Abstract

This paper focuses on the downside risks to the German residential real estate market. It applies the "at-risk" methodology to the German housing market. Quantile regressions reveal that different quantiles of the house price forecast distribution are heterogeneously affected by the same exogenous variables. While past house prices have a very pronounced impact on the median, variations in interest rates predominantly affect the lower quantiles of the distribution. Other factors, such as employment, affect different quantiles more equally. The at-risk model shows that, in the recent era of high inflation and rising interest rates, the forecast distribution of house prices has shifted to the left, resulting in lower expected growth rates of real house prices. Additionally, we find that sparsely populated districts have more pronounced downside risks than densely populated ones.

Suggested Citation

  • Hafemann, Lucas, 2023. "A house prices at risk approach for the German residential real estate market," Technical Papers 07/2023, Deutsche Bundesbank.
    • Handle: RePEc:zbw:bubtps:283351
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    References listed on IDEAS

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    More about this item

    Keywords

    residential real estate; housing; growth-at-risk; quantile regression; Germany;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • 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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