Forecasting residential real estate prices and energy usage in Flanders

Abstract

Purpose

Currently, residential forecasting literature is limited with few to no forecasting papers that consider residential prices and energy consumption for the selling and rental market within a single study. The purpose of this paper is to study the prices and energy usage for both markets by combining an explanatory model with the predictions of a predictive model, which will lead to a better understanding of the forecasting results.

Design/methodology/approach

This study presents an econometric comparison between 508,612 selling properties and 174,007 rental properties transacted in Flanders between January 2019 and December 2023. The authors study their prices and energy usage by combining the causal results of a hedonic price model (HPM) with the predictions of an autoregressive integrated moving average model (ARIMA).

Findings

The authors find that both markets are extremely sensitive to changes in related factors, whereby selling prices are primarily influenced by macroeconomic factors, but rental prices and especially energy usage are also sensitive to market standards. Policies that target energy efficiency can therefore steer its future trend. In addition, in line with previous literature, the HPM shows an increasingly strong relationship between residential prices and energy efficiency over the years, indicating that these steering energy policies also indirectly monitor residential prices.

Originality/value

This study underscores the importance of integrating the results of an explanatory model with a predictive model. It demonstrates that combining them provides a more comprehensive understanding which is helpful for policymakers, real estate professionals and investors during their decision-making process.

Citation

Gerassimenko, A., De Moor, L. and Defau, L. (2024), "Forecasting residential real estate prices and energy usage in Flanders", International Journal of Housing Markets and Analysis, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/IJHMA-07-2024-0105