Supply, Demand and Asymmetric Adjustment of House Prices in Poland

Gluszak Michal () and Trojanek Radoslaw ()
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Gluszak Michal: Cracow University of Economics, ul. Rakowicka 27, 31-510 Cracow, Poland
Trojanek Radoslaw: Poznań University of Economics and Business, Al. Niepodległości 10, 61-875 Poznań, Poland

Real Estate Management and Valuation, 2024, vol. 32, issue 2, 31-45

Abstract: In recent years, a lot of empirical effort has been made to search for potential nonlinear responses of house prices to various demand and supply factors. This paper examines Poland's heterogeneous regional housing market reactions to key economic variables from 2000 to 2022. The study raises two research questions related to the asymmetric adjustment of housing markets to selected demand and supply shocks. Firstly, we ask whether the house price adjustments to negative shocks are relatively minor (for example, during an economic downturn) when compared to positive shocks (prevalent in booming markets), mainly due to the loss aversion behavior theory and nominal rigidity of house prices. In particular, we test the hypothesis that house prices react more to positive impulses from supply and demand than negative ones. Secondly, we investigate whether market reactions are similar for large and small metropolitan markets. The second hypothesis posits that metropolitan housing markets adjust asymmetrically to demand and supply shocks based on the city size (population and housing stock in a given city). The study uses a nonlinear ARDL model to test the research hypotheses empirically. This paper provides new insights into the nonlinear reactions of house prices to exogenous shocks and adds to the limited empirical evidence from less developed economies.

Keywords: asymmetric adjustment; house prices; demand shock; supply shock (search for similar items in EconPapers)
JEL-codes: C32 R15 R21 R31 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:vrs:remava:v:32:y:2024:i:2:p:31-45:n:1003

DOI: 10.2478/remav-2024-0013

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