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House Prices and Bubbles in New Zealand


Patricia Fraser


Curtin University of Technology - Curtin Business School - Bentley Campus; University of Aberdeen - Business School

Martin Hoesli


University of Geneva - Graduate School of Business (HEC-Geneva); University of Aberdeen - Business School; Swiss Finance Institute

Lynn McAlevey


University of Otago - Department of Finance and Quantitative Analysis

Journal of Real Estate Finance and Economics, Vol. 37, No. 1, 2008

Abstract:     
This paper studies actual (real) house prices relative to fundamental (real) house values in New Zealand for the period 1970-2005. Utilizing a dynamic present value model, we find disparities between actual and fundamental house prices in the early 1970s and 1980s and from 2000 to date. We model the bubble component that is related to fundamentals (the intrinsic component), making it possible to highlight whether a bubble still exists after that component is accounted for. We then analyze any remaining bubble to detect any momentum behavior. Much of the overvaluation of the housing market is found to be due to price dynamics rather than an overreaction to fundamentals.

Keywords: real house prices, real disposable income, fundamentals, present value, time-varying risk, bubbles

JEL Classification: G12, R31, G18

Accepted Paper Series


Date posted: November 4, 2007  

Suggested Citation

Fraser, Patricia, Hoesli, Martin and McAlevey, Lynn, House Prices and Bubbles in New Zealand. Journal of Real Estate Finance and Economics, Vol. 37, No. 1, 2008. Available at SSRN: http://ssrn.com/abstract=1026599

Contact Information

Patricia Fraser
Curtin University of Technology - Curtin Business School - Bentley Campus ( email )
GPO Box U1987
Perth WA 6845
Australia
University of Aberdeen - Business School ( email )
Edward Wright Building
Dunbar Street
Aberdeen, Scotland AB24 3QY
United Kingdom
Martin Edward Ralph Hoesli (Contact Author)
University of Geneva - Graduate School of Business (HEC-Geneva) ( email )
40 Boulevard du Pont d'Arve
Geneva 4, 1211
Switzerland
+41 22 379 8122 (Phone)
+41 22 379 8104 (Fax)
University of Aberdeen - Business School ( email )
Edward Wright Building
Dunbar Street
Aberdeen, Scotland AB24 3QY
United Kingdom
+41 22 379 8122 (Phone)
+41 22 379 8104 (Fax)
Swiss Finance Institute ( email )
c/o University of Geneve
40, Bd du Pont-d'Arve
1211 Geneva, CH-6900
Switzerland

Lynn McAlevey
University of Otago - Department of Finance and Quantitative Analysis ( email )
Dunedin
New Zealand
Feedback to SSRN (Beta)


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