Macro and Micro Drivers of House Price Dynamics: An Application to Dutch Data

38 Pages Posted: 9 Jun 2011

See all articles by Gabriele Galati

Gabriele Galati

De Nederlandsche Bank

Federica Teppa

De Nederlandsche Bank

Rob J. M. Alessie

University of Groningen; Netspar; Tilburg University - Center for Economic Research (CentER)

Multiple version iconThere are 2 versions of this paper

Date Written: March 5, 2011

Abstract

What is the role of micro and macro factors in determining house prices? We address this question by analyzing data on housing and mortgages from a survey of about 2,000 Dutch households over the period 1993–2009. We focus on the determinants of house owners’ subjective assessment of the value of their house, and highlight five main findings. First, house-specific factors, such as location and year of construction, play an important role in house price dynamics. Financing conditions – i.e. the presence of a mortgage, the mortgage type and the mortgage rate paid by households – are also important. Second, household-specific factors which the literature has found to explain the bias of self-reported house values (household income and wealth) have a significant effect on house prices. Third, macroeconomic variables such as long-term interest rates influence to an important extent how households value their home. Fourth, the dynamics of subjective house prices are “well behaved”, both in terms of persistence and mean reversion, indicating that house prices tend to converge to their long run equilibrium value. Finally, we find significant heterogeneity and segmentation of subjective house prices, especially along the dimensions of location, degree of urbanization, funding conditions and households’ income expectations. Overall, our results support the importance of including microeconomic factors in the analysis house price dynamics.

Suggested Citation

Galati, Gabriele and Teppa, Federica and Alessie, Rob J. M., Macro and Micro Drivers of House Price Dynamics: An Application to Dutch Data (March 5, 2011). Available at SSRN: https://ssrn.com/abstract=1803087 or http://dx.doi.org/10.2139/ssrn.1803087

Gabriele Galati (Contact Author)

De Nederlandsche Bank ( email )

PO Box 98
1000 AB Amsterdam
Amsterdam, 1000 AB
Netherlands

Federica Teppa

De Nederlandsche Bank ( email )

PO Box 98
1000 AB Amsterdam
Amsterdam, 1000 AB
Netherlands

Rob J. M. Alessie

University of Groningen ( email )

P.O. box 800
9700 AV Groningen
Netherlands
050-3637240 (Phone)

HOME PAGE: http://members.chello.nl/~r.j.m.alessie

Netspar

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

HOME PAGE: http://www.netspar.nl

Tilburg University - Center for Economic Research (CentER)

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

Register to save articles to
your library

Register

Paper statistics

Downloads
164
Abstract Views
906
rank
137,919
PlumX Metrics