Assessing House Price Developments in the EU

Nicolas Philiponnet and Alessandro Turrini

No 48, European Economy - Discussion Papers from Directorate General Economic and Financial Affairs (DG ECFIN), European Commission

Abstract: Booms and busts in house prices may have major macro-financial implications. Accordingly, monitoring developments in house prices plays an important role in the assessment of macroeconomic risks. This paper provides a methodology to estimate benchmarks for the assessment of developments in house prices in the EU context. A number of approaches are developed, based on (i) long-term averages for price-to-income ratios, (ii) long-term averages for price-to-rent ratios (iii) predictions from cointegration relationships between real house prices and their demand and supply determinants. With the latter approach, cointegration analysis is carried out both on individual countries' time series and on a panel of EU countries. The paper makes alternative proposals for computing long-term averages for price-to-income and price-to-rent ratios with a view to combining cross-country comparability with representativeness. The various benchmarks are combined to define a single synthetic benchmark based on model averaging techniques.

JEL-codes: C32 E37 R21 R31 (search for similar items in EconPapers)
Pages: 52 pages
Date: 2017-05
New Economics Papers: this item is included in nep-mac and nep-ure
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Citations: View citations in EconPapers (20)

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Persistent link: https://EconPapers.repec.org/RePEc:euf:dispap:048

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