Don't Look Up: House Prices in Emerging Europe

Serhan Cevik and Sadhna Naik

No 2022/236, IMF Working Papers from International Monetary Fund

Abstract: This paper investigates how housing prices respond to economic, financial and demographic conditions in emerging markets in Europe. We use quarterly data covering 10 countries over the period 1998–2022 and implement a panel quantile regression approach to obtain a granular analysis of real estate markets. Overall, economic, financial and demographic factors explain the changes in real house prices in emerging Europe, with income growth having the most significant impact. Quantile regression estimations show that income growth matters more for higher housing prices than those at the lower quantiles of the property market. We also find that an increase in short-term or long-term interest rates have a price-dampening impact, indicating that a higher cost of borrowing is associated with lower real house prices. These results indicate that the downturn in house prices could deepen with the looming economic recession and soaring interest rates.

Keywords: House prices; quantile regression; instrumental variable; emerging markets; Europe; price-dampening impact; quantile regression estimation; panel quantile regression approach; interest rate elasticity; regression approach; lower-price range; Housing prices; Long term interest rates; Short term interest rates; Income; Inflation (search for similar items in EconPapers)
Pages: 23
Date: 2022-12-02
New Economics Papers: this item is included in nep-ure
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Journal Article: Don’t Look Up: House Prices in Emerging Europe (2023)
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