Heterogeneity in House Price Dynamics

23 Pages Posted: 28 Feb 2013

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: February 27, 2013

Abstract

To what extent do house price dynamics differ across market segments? And what determines this heterogeneity? We address these questions by analysing a data set of individual houses and mortgages, based on a survey of about 2,000 Dutch households over the period 2003-2011. We estimate a dynamic panel data model of house price dynamics by means of the Arellano-Bond estimator. Three main empirical results emerge. First, we generally find that house price dynamics imply a convergence towards their long-run equilibrium value, as indicated by a negative serial correlation coefficient and a positive estimated mean reversion coefficient. Second, there is evidence that the housing market in the Netherlands is inefficient. Third, there is important heterogeneity across different market segments. We document that the speed of convergence of house price dynamics and the efficiency of housing markets depends on the geographical location and degree of urbanization, the type and year of construction of a house, the type of mortgage financing and households’ sentiment about the medium-term outlook for income.

Keywords: housing market dynamics, house prices, heterogeneity, survey data, panel analysis

JEL Classification: D14, G12, R32

Suggested Citation

Galati, Gabriele and Teppa, Federica and Alessie, Rob J. M., Heterogeneity in House Price Dynamics (February 27, 2013). De Nederlandsche Bank Working Paper No. 371. Available at SSRN: https://ssrn.com/abstract=2225762 or http://dx.doi.org/10.2139/ssrn.2225762

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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