The dynamic effect of macroeconomic factors on housing prices: Evidence from South Africa

Thami Innocent Lekhuleni and Godfrey Ndlovu

PLOS ONE, 2023, vol. 18, issue 11, 1-23

Abstract: This study examines the dynamic short- and long-run causal relationship between South African real house prices and key macroeconomic fundamentals (gross domestic product(GDP), mortgage rate, exchange rate-USDZAR, affordability, household debt to disposable income, unemployment rate, share prices (JSE ALL share index), foreign direct investment, and producer price index) over the period 2000Q1-2019Q4. The study uses a vector error correction model (VECM) to estimate the relationships while accounting for endogeneity and reverse causality. Although, there seems to be a significant association(both short and long-run) between house prices and all macroeconomic fundamental variables, GDP and producer price index appear to have the greatest impact. Further, our results suggest that any short-term disequilibrium in house prices always self-corrects in the long-run.

Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:plo:pone00:0290552

DOI: 10.1371/journal.pone.0290552

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