Historical decomposition of the Cyprus Residential Property Prices

Chryso Aristidou () and George Thucydides
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Chryso Aristidou: Central Bank of Cyprus

No 2022-3, Working Papers from Central Bank of Cyprus

Abstract: The aim of this paper is to examine the main driving force(s) of residential property prices during various periods, via historical decomposition. This is achieved by establishing the contribution of di?erent structural shocks to the historical dynamics of the residential property price index. For every quarter in the sample, the growth rate of the residential property price index is decomposed into its di?erent components in order to assess the driving forces behind residential property prices ?uctuations. In e?ect, an insight into possible disconnection of property prices and economic fundamentals could potentially also be gained, thus providing indications of possible vulnerabilities building up in the sector, which would in turn impose risks on fnancial stability. Furthermore, emphasis is given on the recent surge in construction costs which is shown to play a predominant role in the recent residential property price dynamics.

Keywords: Construction cost; Residential Property Price Index (RPPI); Historical Decomposition (search for similar items in EconPapers)
JEL-codes: C11 C32 R30 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2022-10
New Economics Papers: this item is included in nep-ure
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Persistent link: https://EconPapers.repec.org/RePEc:cyb:wpaper:2022-3

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