Assessing house price sustainability

Miroslav Plašil and Michal Andrle

from Czech National Bank, Research and Statistics Department

Abstract: This article sets out to present the CNB's approach to determining fundamental house prices. House price sustainability is assessed by calculating two indicators. The first is macroprudential in nature and measures attainable property price levels compatible with safe debt financing. The second indicator is based on asset pricing theory and assesses the benefits of property ownership relative to long-term renting and alternative investments. Both indicators show that residential property in the Czech Republic was overvalued by 10%-15% in the second half of 2018.

Date: 2019
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:cnb:ocpubc:tafs2019/1

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