Comovements and Spillovers in International Commercial and Residential Real Estate Markets

26 Pages Posted: 16 Jul 2019

See all articles by N. Kundan Kishor

N. Kundan Kishor

University of Wisconsin - Milwaukee

Date Written: July 15, 2019


To what extent do the commercial and the residential estate markets move together across different countries? Do the shocks originating in one of these markets spillover to the other markets? We answer these questions by applying a modified version of the dynamic factor model to the commercial and residential real estate prices in the Euro area, Hong Kong, Singapore and the U.S. This modified dynamic factor model decomposes the price growth in these two real estate markets into common, spillover and idiosyncratic components. The results show significant heterogeneity in the relative importance of these three components in the evolution of commercial and residential price growth across different countries and across time. Our findings suggest that the spillover from residential to commercial real estate market dominates the spillover from commercial to real estate market for all the countries in our sample. We also find that common component accounts for a large fraction of the price movements in the residential markets in the EU area and the U.S, whereas spillover and common component together explain more than two-third of the variations in Hong Kong and Singapore. We also find that the role of spillover from one market to another increased significantly during the financial crisis of 2008-09.

Keywords: Commercial Real Estate, Residential Real Estate, Dynamic Factor Model, Spillover

JEL Classification: C51, E44, G10, R30

Suggested Citation

Kishor, N. Kundan, Comovements and Spillovers in International Commercial and Residential Real Estate Markets (July 15, 2019). Available at SSRN: or

N. Kundan Kishor (Contact Author)

University of Wisconsin - Milwaukee ( email )

Bolton Hall 802
3210 N. Maryland Ave.
Milwaukee, WI 53211
United States

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