The distribution of residential property price changes across homeowners and its implications for financial stability in Austria

Nicolas Albacete, Pirmin Fessler and Peter Lindner

Financial Stability Report, 2016, issue 31, 62-81

Abstract: We employ newly available data of the second wave of the Eurosystem Household Finance and Consumption Survey (HFCS) for Austria to construct a house price index for an analysis of households’ financial resilience to possible price shocks in real estate markets. We estimate this house price index based on directly observed object-level information provided by homeowners. This results not only in an accurate index of house price developments as shown in the seminal contribution of Kiel and Zabel (1999), but also allows us to analyze the full distribution of house prices and their changes beyond the mean. We compare our approach to the two other price indices available in Austria, which use hedonic regressions based on transaction or quotation prices, and discuss advantages and disadvantages of the available indices while focusing on our primary objective, analyzing implications for financial stability. We find that the fairly steep increase of house prices recently observed has been driven by a rather small segment of the market. Further results suggest that the observed long-term real estate price increases have been remarkably stable. At the heart of our contribution is an analysis of the impact of house price changes on the loss given default of vulnerable mortgage holders. We base this analysis on scenarios that incorporate the observed empirical distribution of house price changes and show that the risks to financial stability are relatively limited. We conclude with a summary of the findings and provide a general assessment of the Austrian housing market.

Keywords: household-specific property prices; mortgages; banking sector; Austria (search for similar items in EconPapers)
JEL-codes: C81 D31 E21 E31 G21 O52 R31 (search for similar items in EconPapers)
Date: 2016
References: Add references at CitEc
Citations: View citations in EconPapers (10)

Downloads: (external link)
https://www.oenb.at/dam/jcr:3c0c26ae-0d4e-41a6-a29 ... cial%20topics_01.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:onb:oenbfs:y:2016:i:31:b:1

Ordering information: This journal article can be ordered from
Oesterreichische Nationalbank, Documentation Management and Communications Services, Otto-Wagner Platz 3, A-1090 Vienna, Austria

Access Statistics for this article

Financial Stability Report is currently edited by Markus Schwaiger, Birgit Niessner, Vanessa Redak and Martin Schuerz

More articles in Financial Stability Report from Oesterreichische Nationalbank (Austrian Central Bank) P.O. Box 61, A-1011 Vienna, Austria. Contact information at EDIRC.
Bibliographic data for series maintained by Stefan W. Schmitz ().