Determinants of house price dynamics and household indebtedness in Namibia

Charles Kakuru and Teresia Kaulihowa

Studies in Economics and Econometrics, 2022, vol. 46, issue 3, 185-200

Abstract: The paper aims to investigate the determinants of supply and demand-side factors of house price dynamics and their impact on household indebtedness in Namibia. An autoregressive distributed lag (ARDL) model was used. The findings support the hypothesis’ that supply-side and demand-side factors had a significant effect on house price as well as household indebtedness. It was found that money supply, working population, construction cost index, mortgage loans, previous quarter house prices, and current GDP were found to be the key determinants of both supply and demand-side factors of house-price dynamics in Namibia. Additionally, an increase in mortgage loans would increase household indebtedness in the short run and was found to be the key determinant of household indebtedness in Namibia. This indicates that an expansionary monetary policy could address the twin problem of rising house prices and household indebtedness. Policy implications derived from the study indicate that although monetary policy can be used to address the issues of escalating house prices and indebtedness, this policy intervention may be limited because Namibia does not have an autonomy regarding its monetary policy due to its currency board operations arrangement.

Date: 2022
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DOI: 10.1080/03796205.2022.2143883

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