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Article
Publication date: 5 November 2020

Hardik Marfatia

The studies on international housing markets have not modeled frequency domain and focused only on the time domain. The purpose of the present research is to fill this gap…

Abstract

Purpose

The studies on international housing markets have not modeled frequency domain and focused only on the time domain. The purpose of the present research is to fill this gap by using the state-of-the-art econometric technique of wavelets to understand how differences in the horizon of analysis across time impact international housing markets’ relationship with some of the key macroeconomic variables. The purpose is to also analyze the direction of causation in the relationships.

Design/methodology/approach

The author uses the novel time–frequency analysis of international housing markets’ linkages to the macroeconomic drivers. Unlike conventional approaches that do not distinguish between time and frequency domain, the author uses wavelets to study house prices’ relationship with its drivers in the time–frequency space. The novelty of the approach also allows gaining insights into the debates that deal with the direction of causation between house price changes and macroeconomic variables.

Findings

Results show that the relationship between house prices and key macroeconomic indicators varies significantly across countries, time, frequencies and the direction of causation. House prices are most related to interest rates at the higher frequencies (short-run) and per capita income growth at the lower frequencies (long-run). The role of industrial production and income growth has switched over time at lower frequencies, particularly, in Finland, France, Sweden and Japan. The stock market’s nexus with the housing market is significant mainly at high to medium frequencies around the recent financial crisis.

Research limitations/implications

The present research implies that in contrast to the existing approaches that are limited to the only time domain, the frequency considerations are equally, if not more, important.

Practical implications

Results show that interested researchers and analysts of international housing markets need to account for the both horizon and time under consideration. Because the factors that drive high-frequency movements in housing market are very different from low-frequency movements. Furthermore, these roles vary over time.

Social implications

The insights from the present study suggest policymakers interested in bringing social change in the housing markets need to account for the time–frequency dynamics found in this study.

Originality/value

The paper is novel on at least two dimensions. First, to the best of the author’s knowledge, this study is the first to propose the use of a time–frequency approach in modeling international housing market dynamics. Second, unlike present studies, it is the first to uncover the direction of causation between house prices and economic variables for each frequency at every point of time.

Details

International Journal of Housing Markets and Analysis, vol. 14 no. 4
Type: Research Article
ISSN: 1753-8270

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Article
Publication date: 7 June 2018

DeGraft Owusu-Manu, David John Edwards, Erika Anneli Pärn, Richard Ohene Asiedu and Alex Aboagye

While mortgage markets have gradually emerged in many African countries, substantial barriers still hinder their growth and expansion. Affordability has been widely cited…

Abstract

Purpose

While mortgage markets have gradually emerged in many African countries, substantial barriers still hinder their growth and expansion. Affordability has been widely cited as a prominent issue that doggedly remains at the core of urban housing problems. Hence, this paper aims to investigate the determinants of mortgage price affordability.

Design/methodology/approach

Data were gathered using semi-structured questionnaires obtained from a sample drawn from three major West African mortgage financing institutions. Respondents rated the variables using a five-point Likert item rating. The survey results were analysed using exploratory factor analysis.

Findings

In total, 11 variables that influence mortgage affordability were categorised within five principal components, namely, economic factors, financial factors, property characteristics, developmental factors and geographical factors.

Practical implications

The results provide insightful guidance to policymakers and practitioners on how to mitigate affordability issues within Ghana’s fledgling mortgage market. Failure to address the mortgage price affordability conundrum will place enormous pressure upon social housing and rental accommodation.

Originality/value

The research findings expand existing frontiers of knowledge by investigating and reporting upon the determinants of mortgage price affordability. The work also engenders wider debate on the need to establish mortgage packages targeted at low-to-middle-income earners. The culmination of analysis and debate will provide a robust basis for developing a future housing policy framework.

Details

International Journal of Housing Markets and Analysis, vol. 11 no. 4
Type: Research Article
ISSN: 1753-8270

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Article
Publication date: 25 February 2014

Colin Jones and Harry W. Richardson

– This paper aims to examine how the exogenous shock of the global financial crisis has had a differential impact on the housing markets of the USA and UK.

Abstract

Purpose

This paper aims to examine how the exogenous shock of the global financial crisis has had a differential impact on the housing markets of the USA and UK.

Design/methodology/approach

The paper begins by examining the nature and dynamics of the global financial crisis. It presents a detailed comparison of institutional and housing market characteristics in each country. A particular focus is the differences in mortgage funding and subprime lending trends over the decade leading up to the financial crisis.

Findings

The analysis demonstrates the distinctiveness of the recent housing cycles and the geography of the downward price adjustments. Relative unemployment rates play a key role in these outcomes. Despite the different dynamics of the boom and bust, there is a common legacy in terms of the collapse of house building, repossessions/foreclosures and falling home ownership rates. The short-term policy responses by both governments addressed the same target issues in alternative ways but with different outcomes. Longer-term solutions are still being debated in both countries.

Originality/value

Innovatory insights are provided by the comparison of the sub-national spatial pattern of the recent house price cycle in two countries.

Details

International Journal of Housing Markets and Analysis, vol. 7 no. 1
Type: Research Article
ISSN: 1753-8270

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Book part
Publication date: 27 February 2009

T.J. O’Neill, J. Penm and R.D. Terrell

Housing activity is an important indicator of general economic activity, and house price movements are an important variable in international financial markets. In this…

Abstract

Housing activity is an important indicator of general economic activity, and house price movements are an important variable in international financial markets. In this chapter we utilise vector autoregressive models to examine how the interrelationship between housing activity and general economic activity has evolved in four OECD countries. Our results provide support for the hypothesis that the relationship between housing activity and general economic activity has changed in many OECD countries. For Australia, however, no such evidence was found. These results suggest that caution needs to be exercised when using previous experience to forecast both housing cycles and general economic activity.

Details

Research in Finance
Type: Book
ISBN: 978-1-84855-447-4

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Article
Publication date: 25 April 2018

Alper Ozun, Hasan Murat Ertugrul and Yener Coskun

The purpose of this paper is to introduce an empirical model for house price spillovers between real estate markets. The model is presented by using data from the US-UK…

Abstract

Purpose

The purpose of this paper is to introduce an empirical model for house price spillovers between real estate markets. The model is presented by using data from the US-UK and London-New York housing markets over a period of 1975Q1-2016Q1 by employing both static and dynamic methodologies.

Design/methodology/approach

The research analyzes long-run static and dynamic spillover elasticity coefficients by employing three methods, namely, autoregressive distributed lag, the fully modified ordinary least square and dynamic ordinary least squares estimator under a Kalman filter approach. The empirical method also investigates dynamic correlation between the house prices by employing the dynamic control correlation method.

Findings

The paper shows how a dynamic spillover pricing analysis can be applied between real estate markets. On the empirical side, the results show that country-level causality in housing prices is running from the USA to UK, whereas city-level causality is running from London to New York. The model outcomes suggest that real estate portfolios involving US and UK assets require a dynamic risk management approach.

Research limitations/implications

One of the findings is that the dynamic conditional correlation between the US and the UK housing prices is broken during the crisis period. The paper does not discuss the reasons for that break, which requires further empirical tests by applying Markov switching regime shifts. The timing of the causality between the house prices is not empirically tested. It can be examined empirically by applying methods such as wavelets.

Practical implications

The authors observed a unidirectional causality from London to New York house prices, which is opposite to the aggregate country-level causality direction. This supports London’s specific power in the real estate markets. London has a leading role in the global urban economies residential housing markets and the behavior of its housing prices has a statistically significant causality impact on the house prices of New York City.

Social implications

The house price co-integration observed in this research at both country and city levels should be interpreted as a continuity of real estate and financial integration in practice.

Originality/value

The paper is the first research which applies a dynamic spillover analysis to examine the causality between housing prices in real estate markets. It also provides a long-term empirical evidence for a dynamic causal relationship for the global housing markets.

Details

Journal of Capital Markets Studies, vol. 2 no. 1
Type: Research Article
ISSN: 2514-4774

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Article
Publication date: 8 February 2018

Shiau Hui Kok, Normaz Wana Ismail and Chin Lee

The purpose of this paper is to examine the house market in Malaysia from 2002 to 2015. Specifically, the macroeconomic determinants on the house price and house demand…

Abstract

Purpose

The purpose of this paper is to examine the house market in Malaysia from 2002 to 2015. Specifically, the macroeconomic determinants on the house price and house demand are investigated.

Design/methodology/approach

Structural Vector Autoregressive Regression was adopted to estimate the unexpected changes in both house demand (residential transaction volume) and prices based on economic theoretical reasoning that consider shock from macroeconomic determinants.

Findings

The transaction volume and real house prices respond to most of the macroeconomic shocks. While the impact of real gross domestic product (GDP) on house prices appears to be stronger and longer in comparison to other macroeconomic shocks, a 60 per cent change in house prices can be explained by real GDP regardless of whether it is in the short run or the long run. The studies also reveal that a positive effective exchange rate plays an important role when demonstrating the transaction volume. Moreover, monetary liquidity plays a major role in justifying the transaction volume. This implies that mortgage lending may have an impact on housing demand. Meanwhile, movements of house prices cannot be explained by the demand in quantity. This signifies that supply has a strong influence in determining the price.

Research limitations/implications

This study has implications on policymakers of which the interest rate as a cooling measure might not be effective in the short run. The interest rate has very little impact on housing prices. Furthermore, policymakers should address the concerns on speculations, as the results reveal that monetary liquidity and the exchange rate have a strong impact on the housing demand.

Originality/value

This study seeks to provide answers regarding the recent upsurge of Malaysian housing prices. Besides focusing on the house price changes, this study addresses the role of transaction volume while evaluating the house market, as housing prices are usually downwards rigid. Since the price and transaction volume are both related to the transaction activity, this study is significant and could be a good reflection on the actual demand behaviour in the residential market.

Details

International Journal of Housing Markets and Analysis, vol. 11 no. 2
Type: Research Article
ISSN: 1753-8270

Keywords

Content available
Article
Publication date: 5 August 2021

Anthanasius Fomum Tita and Pieter Opperman

Homeownership provides shelter and is a vital component of wealth, and house purchase signifies a lifetime achievement for many households. For South Africa confronted…

Abstract

Purpose

Homeownership provides shelter and is a vital component of wealth, and house purchase signifies a lifetime achievement for many households. For South Africa confronted with social and structural challenges, homeownership by the low and lower middle-income household is pivotal for its structural transformation process. In spite of these potential benefits, research on the affordable housing market in the context of South Africa is limited. This study aims to contribute to this knowledge gap by answering the question “do changes in household income per capita have a symmetric or asymmetric effect on affordable house prices?”

Design/methodology/approach

A survey of the international literature on house prices and income revealed that linear modelling that assumes symmetric reaction of macroeconomic variables dominates the empirical strategy. This linearity assumption is restrictive and fails to capture possible asymmetric dynamics inherent in the housing market. The authors address this empirical limitation by using asymmetric non-linear autoregressive distributed lag models that can test and detect the existence of asymmetry in both the long and short run using data from 1985Q1 to 2016Q3.

Findings

The results revealed the presence of an asymmetric long-run relationship between affordable house prices and household income per capita. The estimated asymmetric long-run coefficients of logIncome[+] and logIncome[−] are 1.080 and −4.354, respectively, implying that a 1% increase/decrease in household income per capita induces a 1.08% rise/4.35% decline in affordable house prices everything being equal. The positive increase in affordable house prices creates wealth, helps low and middle-income household climb the property ladder and can reduce inequality, which provides support for the country’s structural transformation process. Conversely, a decline in affordable house prices tends to reduce wealth and widen inequality.

Practical implications

This paper recommends both supply- and demand-side policies to support affordable housing development. Supply-side stimulants should include incentives to attract developers to affordable markets such as municipal serviced land and tax credit. Demand-side policy should focus on asset-based welfare policy; for example, the current Finance Linked Income Subsidy Programme (FLISP). Efficient management and coordination of the FLISP are essential to enhance the affordability of first-time buyers. Given the enormous size of the affordable property market, the practice of mortgage securitization by financial institutions should be monitored, as a persistent decline in income can trigger a systemic risk to the economy.

Social implications

The study results illustrate the importance of homeownership by low- and middle-income households and that the development of the affordable market segment can boost wealth creation and reduce residential segregation. This, in turn, provides support to the country’s structural transformation process.

Originality/value

The affordable housing market in South Africa is of strategic importance to the economy, accounting for 71.4% of all residential properties. Homeownership by low and lower middle-income households creates wealth, reduces wealth inequality and improves revenue collection for local governments. This paper contributes to the empirical literature by modelling the asymmetric behaviour of affordable house prices to changes in household income per capita and other macroeconomic fundamentals. Based on available evidence, this is the first attempt to examine the dynamic asymmetry between affordable house prices and household income per capita in South Africa.

Details

International Journal of Housing Markets and Analysis, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1753-8270

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Article
Publication date: 19 January 2021

Rafiq Ahmed, Syed Tehseen Jawaid and Samina Khalil

Housing prices have been increasing tremendously in Pakistan, there should be many reasons but the haphazard urbanization and rapidly growing population. To find out the…

Abstract

Purpose

Housing prices have been increasing tremendously in Pakistan, there should be many reasons but the haphazard urbanization and rapidly growing population. To find out the causes of this price rise, this study aims to assess the impact of the foreign capital inflow and some domestic factors on housing prices.

Design/methodology/approach

To get the benefits of high-frequency data, it has been converted into a monthly, quarterly and yearly basis. The unit root is performed to see the stationarity, Johansen test is used for cointegration and coefficients are obtained through the ordinary least squares technique. The robustness of the results is checked with dynamic ordinary least squares and the Chow breakpoint test is used to detect structural breaks.

Findings

The housing prices have increased over time; this has been reflected in all the data sets under observation. The country has observed a rapid growth in population and urbanization that has badly affected almost every activity of city life. The impact of foreign capital inflow is positive on the house price appreciation. There is a dire need to divert such foreign funds in the housing sector so that it cannot create an artificial price hike. The government should regularly publish a housing policy for the guidance of investors and the public at large. Also, public authorities should provide housing finance facility.

Originality/value

This is a novel work to the best of the authors’ knowledge because no one has studied the impact of foreign capital inflow on the housing market for the economy of Pakistan. Furthermore, this study is different in the sense that it has disaggregated annual data into a monthly and quarterly basis to get the benefits of high-frequency data.

Details

International Journal of Housing Markets and Analysis, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1753-8270

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Article
Publication date: 6 December 2019

Peng Yew Wong, Woon-Weng Wong and Kwabena Mintah

The purpose of this paper is to validate and uncover the key determinants revolving around the Australian residential market downturn towards the 2020s.

Abstract

Purpose

The purpose of this paper is to validate and uncover the key determinants revolving around the Australian residential market downturn towards the 2020s.

Design/methodology/approach

Applying well-established time series econometric methods over a decade of data set provided by Australian Bureau of Statistics, Reserve Bank of Australia and Real Capital Analytics, the significant and emerging drivers impacting the Australian residential property market performance are explored.

Findings

Besides changes in the significant levels of some key traditional market drivers, housing market capital liquidity and cross-border investment fund were found to significantly impact the Australian residential property market between 2017 and 2019. The presence of some major positive economic conditions such as low interest rate, sustainable employment and population growth was perceived inadequate to uplift the Australian residential property market. The Australian housing market has performed negatively during this period mainly due to diminishing capital liquidity, excess housing supplies and retreating foreign investors.

Practical implications

A better understanding of the leading and emerging determinants of the residential property market will assist the policy makers to make sound decisions and effective policy changes based on the latest development in the Australian housing market. The results also provide a meaningful path for future property investments and investigations that explore country-specific effects through a comparative analysis.

Originality/value

The housing market determinants examined in this study revolve around the wider economic conditions in Australia that are not new. However, the coalesce analysis on the statistical results and the current housing market trends revealed some distinguishing characteristics and developments towards the 2020s Australian residential property market downturn.

Details

Property Management, vol. 38 no. 2
Type: Research Article
ISSN: 0263-7472

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Article
Publication date: 12 June 2020

Mei-Se Chien and Nur Setyowati

This paper aims to investigate how different uncertainty shocks affect international housing prices.

Abstract

Purpose

This paper aims to investigate how different uncertainty shocks affect international housing prices.

Design/methodology/approach

The authors set up a model of housing price instability with four uncertainty variables and apply the panel generalized method of moments method and quantile regression to estimate the linear and non-linear linkages among the variables based on data of 56 countries from 2001Q1 to 2018Q2.

Findings

Some empirical findings are as follows. Higher macroeconomic uncertainty and global economic policy risk increase housing price instability, whereas greater financial uncertainty and geopolitical risk present reverse effect. Four uncertainty variables are good signals for housing price changes in Asia, and geopolitical risk takes leading role in Europe. Macroeconomic uncertainty positively impacts housing price instability only at a low or middle level in all regions, as financial uncertainty, global economic policy uncertainty and geopolitical risk effects in all regions are smaller at the middle or high level of housing price instability; this confirms the existence of non-linear correlation between each variable.

Originality/value

The findings help investors and policymakers gain a better notion of housing price instability and control into uncertainty signal that could cause housing price instability crash.

Details

International Journal of Housing Markets and Analysis, vol. 14 no. 1
Type: Research Article
ISSN: 1753-8270

Keywords

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