The rental sector and the housing block in STREAM

Brian Micallef and Nathaniel Debono ()
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Nathaniel Debono: Central Bank of Malta

No WP/03/2020, CBM Working Papers from Central Bank of Malta

Abstract: In recent years the housing market in Malta has been characterised by significant demand and supply developments reflecting strong economic and population growth. While the determinants of house prices in Malta have long been studied and documented, much less is known about private sector rents, partly due to the absence of official statistics on this sector. This paper uses information from the Estate Agency Rent Survey to construct a proxy for private sector rents in Malta. Using this index, a specification for private sector rents is specified using an error-correction modelling approach and added to the housing block in STREAM. Consistent with theoretical expectations, a one-to-one relationship between rents and house prices is confirmed in the long-run. Short-run dynamics are affected by past developments in rents, the foreign population, the number of tourist nights stayed in private accommodation and the housing stock per household. The housing block in STREAM is modified to accommodate for the inclusion of the rents equation, with the specifications for house prices and dwelling investment modelled following a stock-flow framework in line with Gatt et al. (2018). A simulation using STREAM illustrates the impact on the main macroeconomic variables following a hypothetical 10% increase in real housing investment.

JEL-codes: E37 R21 R31 (search for similar items in EconPapers)
Pages: 26 pgs
Date: 2020
New Economics Papers: this item is included in nep-mac and nep-ure
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:mlt:wpaper:0320

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