House Price Inflation in Johannesburg

L Janse van Rensburg and P Burger

Studies in Economics and Econometrics, 2011, vol. 35, issue 3, 65-84

Abstract: Did Johannesburg suffer a house price bubble during the last decade? To explore this question the paper first estimates a hedonic model using data from real estate transactions in Johannesburg. A hedonic model may capture pure house price inflation more accurately compared to a median house price series (e.g. the ABSA series). The paper uses the hedonic pure price series to estimates a number of Vector Error-Correction Models (VECM). These models highlight the rather significant impact of credit extension on the growth of house prices. This impact is over and above the impact of disposable income and the mortgage rate, two fundamental factors that explain house prices. The results also highlight the need to let the mortgage rate play a bigger role in the allocation of mortgage credit.

Date: 2011
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DOI: 10.1080/10800379.2011.12097227

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