Evidence on the variation of idiosyncratic risk in house price appreciation

Jaqueson Galimberti, Lydia Cheung () and Philip Vermeulen
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Lydia Cheung: School of Economics, Auckland University of Technology

No 2022-05, Working Papers from Auckland University of Technology, Department of Economics

Abstract: Using around one million repeat sales observations of single-family homes across New Zealand, over the period 1992 to 2021, we provide evidence that idiosyncratic risk in real house price appreciation varies considerably across houses. We find that idiosyncratic risk is time varying, depends negatively on the initial house price, varies strongly across locations and reduces significantly as the holding period of the house increases. Location is the most important of these factors. By buying an above the median house in a low-risk region, and holding on to the property for a longer period, households can significantly reduce idiosyncratic risk.

Keywords: idiosyncratic risk; house prices; housing markets (search for similar items in EconPapers)
JEL-codes: G1 R1 (search for similar items in EconPapers)
Date: 2022-11
New Economics Papers: this item is included in nep-rmg and nep-ure
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