REAL ESTATE MARKET AT A CROSSROAD - ERA OF AFFORDABLE HOUSING IS GONE

Klára Čermáková; Eduard Hromada; Ondrej Bednar; Tomáš Pavelka

doi:10.52950/ES.2023.12.1.003

Authors

Klára Čermáková Prague University of Economics and Business, Department of Economics, Czech Republic Author
Eduard Hromada Czech Technical University, Czech Republic Author
Ondrej Bednar Prague University of Economics and Business, dept. of Economics, Czech Republic Author
Tomáš Pavelka Prague University of Economics and Business, Prague University of Economics and Business, Department of Managerial Economics , Czech Republic Author

DOI:

https://doi.org/10.52950/ES.2023.12.1.003

Keywords:

Housing market, Property price, Transactions, Rent, Housing affordability, Market turnover, Inflation, Mortgage loans

Abstract

Within a broad discussion on property price formation and property market specifics, this paper aims to investigate the relationship between property price trends and the number of transactions occurring on the housing market. Specifically, we test whether housing transaction volumes and rents are good predictors of housing prices and discuss causalities and differences in this relationship in the sales and rental property markets. We provide evidence from selected European property markets on the relationship between property price trends and the number of transactions occurring in these markets. We argue that an increased number of transactions is predictive of an increase in property prices, but prices tend to be rigid in the opposite (downward) direction. Thus, a cooling down of demand for properties may rather decrease the number of transactions than push down property prices. This appealing result may shed light on understanding why property prices appreciate across time and countries.

Data:
Received: 5 Feb 2023
Revised: 1 Apr 2023
Accepted: 17 Apr 2023
Published: 1 May 2023