This paper aims to examine the housing market in Greece after the Global Financial Crisis focussing on regional analysis and urban markets in Athens and Thessaloniki.
The paper uses a data set of over 70,750 property values from 2007 until 2014 incorporating characteristics variables upon which hedonic models are estimated. These form the bases for calculating value indices for mix adjusted houses/apartments by year and region. The indices are used in a panel model in which regional and economic variables are included as independent variables. Using advances in dynamic panel data modelling, a bias-corrected least squares dummy variable corrected (LSDVC) model is applied.
Results indicate the importance of macroeconomic variables in terms of the role of disposable income and significantly different regional effects. Examining the major urban markets, results indicate significant differences in the response of house values to exogenous demand side influences, consistent with the finding of significant regional differences in the LSDVC.
While data on valuations are used that may contain smoothing, the data set covers a large sample of residential properties. As regional economic differences are significant and persistent, housing markets will also behave differently, and hence national policies, unless targeted, will have regionally differentiated effects.
Regional heterogeneity needs to be considered in model estimation.
Policymakers should consider regional differences to improve policy effectiveness.
This is the first paper to use a large sample of residential properties in Greece and apply the LSDVC model to overcome estimation biases.
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