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

38 Pages Posted: 29 Oct 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 1, 2011

Abstract

What is the role of micro and macro factors in determining house prices? We address this question empirically by analysing survey data on housing and mortgages from the DNB Household Survey for the period 1993–2009. We focus on the determinants of house owners’ subjective assessment of the value of their house. We highlight three main findings. First, subjective house prices are strongly related to household-specific and house-specific factors, including year of construction, cohort, education level, income and wealth. Financing conditions – in particular the presence of a mortgage as well as the mortgage type, and the mortgage rate – play an important role. Second, we find that macro variables such as the long-term interest rate also influence to an important extent how households value their home. Third, there is evidence of “well behaved” dynamics of subjective house prices, both in terms of persistence and in terms of mean reversion, indicating that house prices tend to converge to their long run equilibrium value. Finally, our findings support a certain degree of heterogeneity and segmentation in subjective house prices, especially along the dimensions of geographical region and degree of urbanization, funding conditions, and income expectations.

Keywords: House prices, survey data, panel analysis

JEL Classification: D14, E21, G11

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 1, 2011). De Nederlandsche Bank Working Paper No. 288. Available at SSRN: https://ssrn.com/abstract=1950606 or http://dx.doi.org/10.2139/ssrn.1950606

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

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