Condominium Prices and Inflation: The Role of Financial Inflows and Transaction Volumes in Japan

Jun Nagayasu

No 76, DSSR Discussion Papers from Graduate School of Economics and Management, Tohoku University

Abstract: We investigate the dynamics of condominium prices by using a new dataset containing national and regional data on prices and disaggregate transaction volumes for Japan. In particular, we are interested in the role of capital inflows and transaction volumes, which have recently been discussed worldwide as important determinants of property prices. First, by using the multivariate cointegration method, we show that the condominium market has not experienced real estate bubbles since 2008. We document several economic fundamentals; notably, real income, mortgage rates, and capital flows, have influenced the long-term trend in condominium prices. Second, on some occasions, we find that condominium price inflation can be explained by transaction volumes, which are positively linked to information inflows, consistent with the market microstructure model. Transaction volumes influence price inflation in Tokyo, in particular at times of high market activities.

Pages: 32 pages
Date: 2018-03
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Persistent link: https://EconPapers.repec.org/RePEc:toh:dssraa:76

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