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The effects of political, economic and financial components of country risk on housing prices in South Africa

Paul-Francois Muzindutsi (School of Accounting, Economics and Finance, College of Law and Management Studies, University of Kwazulu-Natal, Durban, South Africa)
Sanelisiwe Jamile (School of Accounting, Economics and Finance, College of Law and Management Studies, University of Kwazulu-Natal, Durban, South Africa)
Nqubeko Zibani (School of Accounting, Economics and Finance, College of Law and Management Studies, University of Kwazulu-Natal, Durban, South Africa)
Adefemi A. Obalade (School of Accounting, Economics and Finance, College of Law and Management Studies, University of Kwazulu-Natal, Durban, South Africa)

International Journal of Housing Markets and Analysis

ISSN: 1753-8270

Article publication date: 3 August 2020

Issue publication date: 23 June 2021

347

Abstract

Purpose

The housing market in South Africa has the potential to drive economic growth and attract foreign investment, but it can be affected by various risk factors. This paper aims to conduct an empirical analysis of the effect of country risk components on the housing market in South Africa.

Design/methodology/approach

Linear and nonlinear autoregressive distributed lag (ARDL) models were used to evaluate the effects of the economic, financial and political risk factors of country risk on the prices of different segments of houses based on 276 monthly time-series data from January1995 to December 2015.

Findings

First, the results established that the three housing indices were more sensitive to political risk in the long run. Second, short run results showed that the three housing indices were largely influenced by their own preceding adjustments in the short run albeit minimal influences from political risk. Third, large housing segments indicated a higher magnitude of the country risk effect in South Africa.

Originality/value

This paper concluded that the response of housing prices to changes in the country risk components differed across the three segments of the housing market in South Africa. Consequently, this study presented the first comparison of the reactions of different housing segments to different components country risk.

Keywords

Acknowledgements

Authors would like to acknowledge the contribution of Theolan Padayachee, Kaveshan Perumal and Andiswa Mbhele to the initial stage of this research project.

Citation

Muzindutsi, P.-F., Jamile, S., Zibani, N. and Obalade, A.A. (2021), "The effects of political, economic and financial components of country risk on housing prices in South Africa", International Journal of Housing Markets and Analysis, Vol. 14 No. 3, pp. 523-537. https://doi.org/10.1108/IJHMA-05-2020-0060

Publisher

:

Emerald Publishing Limited

Copyright © 2020, Emerald Publishing Limited

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