Modelling regional house prices

Bram van Dijk, Philip Hans Franses, Richard Paap and Dick van Dijk

Applied Economics, 2011, vol. 43, issue 17, 2097-2110

Abstract: We develop a panel model for regional house prices, for which both the cross-section and the time series dimension is large. The model allows for stochastic trends, cointegration, cross-equation correlations and, most importantly, latent-class clustering of regions. Class membership is fully data-driven and based on the average growth rates of house prices, and the relationship of house prices with economic growth. We apply the model to quarterly data for the Netherlands. The results suggest that there is convincing evidence for the existence of two distinct clusters of regions with pronounced differences in house price dynamics.

Date: 2011
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Working Paper: Modeling regional house prices (2007)
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DOI: 10.1080/00036840903085089

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