Arbeitspapier
What drives returns to euro area housing? Evidence from a dynamic dividend-discount model
We apply a dynamic dividend-discount model to analyse unexpected housing returns in a panel of eight euro area countries which together comprise 90% of euro area GDP. The application of this model allows for a de-composition of house price movements into movements in rent (cash-flow) and expected return news components. The empirical application of the model involves the estimation of a panel vector autoregressive model (VAR) for four variables –excess return to housing, rents, the real interest rate and real disposable per capita income– using quarterly data over the period 1985-2007. This empirical investigation yields two main findings. First, the bulk of the variability of house price move-ments in the panel of countries analysed can be attributed to movements in the rental yield. Indeed, perturbations to rents appear to result in a one-to-one analogous movement in house prices over the long term once controlling for changes in expected returns. Second, evidence from the dynamic profile of shocks along with the negative co-movement between changing rental yield expectations and changing expected returns on housing assets would suggest that euro area house prices overreact to news.
- Language
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Englisch
- Bibliographic citation
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Series: ECB Working Paper ; No. 1019
- Classification
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Wirtschaft
Urban, Rural, Regional, Real Estate, and Transportation Economics: Housing Demand
Multiple or Simultaneous Equation Models: Panel Data Models; Spatio-temporal Models
Asset Pricing; Trading Volume; Bond Interest Rates
- Subject
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cash flow news
house price
housing rental yield
panel VAR estimation
return decomposition
Immobilienpreis
Spillover-Effekt
VAR-Modell
Eurozone
- Event
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Geistige Schöpfung
- (who)
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Hiebert, Paul
Sydow, Matthias
- Event
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Veröffentlichung
- (who)
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European Central Bank (ECB)
- (where)
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Frankfurt a. M.
- (when)
-
2009
- Handle
- Last update
-
10.03.2025, 11:42 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Hiebert, Paul
- Sydow, Matthias
- European Central Bank (ECB)
Time of origin
- 2009
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