House price responsiveness of housing investments across major European economies

Arbeitspapier

In comparison with the large literature on house prices, housing investments have been studied far less. This paper investigates the behaviour of private residential investments for the six largest European economies, namely: Germany, France, Italy, Spain, the Netherlands and the United Kingdom. It employs a common modelling structure based on an error correction approach and country specific models. First, co-integration among the parsimoniously specified set of fundamental variables is detected in all countries. Second, cross-country differences are found in the responsiveness of private residential investments to real prices and to other relevant factors. Germany has the strongest response of private residential investments to house price changes whereas Italy shows the lowest responses. In Spain investments seem to be primarily related to their lagged component and short-term changes in house prices, and show a poor relationship with deviations from long-term fundamentals. In some countries, the lagged component of residential investments seems to point to a high persistency effect.

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• Language: Englisch

References and Relationships

• Bibliographic citation: Series: ECB Working Paper ; No. 1461

Classification and Topics

• Classification: Wirtschaft ; Real Estate Markets, Spatial Production Analysis, and Firm Location: General ; Investment; Capital; Intangible Capital; Capacity
• Subject: co-integration ; elasticity ; error-correction mechanism ; Housing investments

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Gattini, Luca ; Ganoulis, Ioannis
• Event: Veröffentlichung
• (who): European Central Bank (ECB)
• (where): Frankfurt a. M.
• (when): 2012

Further information

• Handle: http://hdl.handle.net/10419/153894