switching-regime effect of sovereign risk components on housing prices in South African major cities

Paul-Francois Muzindutsi, Ntuthuko Mbhele, Trayum Gopal, Namishka Rambaran, Thulisile Mthembu, Purusha Ramjiyavan and Fikile Dube

Journal of Academic Finance, 2025

Abstract: Purpose: This study aims to investigate the effect of sovereign risk components on housing prices in six major South African cities under switching regimes conditions. Method: The Markov Switching Model was employed to analyse the switching effect of economic, financial and political risk on the property markets in major South African cities. Results: In the bearish regime, the response of property prices to changes in country risk components varies across the cities. In contrast, country risk components do not affect property prices in the bullish regime in all sampled cities. Cape Town has the most volatile housing prices, and each city’s response to changing regimes is asymmetric, with the likelihood of staying longer in the bullish condition than the bearish market condition. Originality: This study is the first to assess the impact of country risk factors on housing prices for South African cities with a specific focus on switching regimes.

Keywords: Housing price; sovereign risk; Markov Switching Model; Economic Risk; Financial risk; Political risk; South African Cities; Prix de l'immobilier; risque souverain; modèle de commutation de Markov; risque économique; risque financier; risque politique; villes sud-africaines (search for similar items in EconPapers)
JEL-codes: G3 M1 N8 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:jaf:journl:v::y:2025:i::n:764

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