Economic Growth and Increasing Housing Price

Abstract

Several cities and countries in Asia and North America experience large increases in the housing prices. We extend Rebelo (1991) to mimic this fact. We show that growth in real housing prices can be resulted as the economic growth persists, even when population growth is zero. Another finding is that the reported increases in housing prices might be underestimated. In particular, the growth rate of a relative price index may converge to zero even when the housing prices in real terms display sustained growth.

Keywords: economic growth, increasing housing prices, economic fundamentals

JEL Classification: D90, G12, O41, R31