Prague Economic Papers 2017, 26(3):269-285 | DOI: 10.18267/j.pep.613

A Comprehensive Method for House Price Sustainability Assessment in the Czech Republic

Hana Hejlová1, Michal Hlaváček2, Luboš Komárek3
1 Czech National Bank and Institute of Economic Studies, Charles University in Prague, Prague, Czech Republic (hejlova.hana@gmail.com)
2 Czech National Bank and Institute of Economic Studies, Charles University in Prague, Prague, Czech Republic (michal.hlavacek@cnb.cz)
3 Czech National Bank, Faculty of Economics, VŠB-TU Ostrava and The University of Finance and Administration, Prague, Czech Republic (lubos.komarek@cnb.cz)

The article describes approach proposed for the house price equilibrium assessment in the Czech Republic. It first explains why it is necessary to use multiple models simultaneously to correctly assess house price sustainability. It goes on to describe individual models proposed to estimate house price misalignment in the Czech Republic. Results given by these individual models are consonant in identifying periods of over- and undervaluation of house prices but slightly differ in the amplitude of the gaps. A method for aggregating the estimates produced by those approaches is then presented. It works on the premise that more correlated estimates may be evidence of a strong signal, while less correlated estimates may, on the other hand, bring additional information to the house price assessment. By using two sets of weights, it presents an interval of supposed under- or overvaluation of house prices. This method indicates that Czech house prices were roughly at their equilibrium level in mid-2014 following an extended period of slight undervaluation since the mid-2009. It also proves robust to the length of the sample used.

Keywords: house price, multiple models, Czech Republic
JEL classification: C32, R21, R31

Published: June 1, 2017  Show citation

ACS AIP APA ASA Harvard Chicago IEEE ISO690 MLA NLM Turabian Vancouver
Hejlová, H., Hlaváček, M., & Komárek, L. (2017). A Comprehensive Method for House Price Sustainability Assessment in the Czech Republic. Prague Economic Papers, 26(3), 269-285. doi: 10.18267/j.pep.613
Download citation
  • BibTeX (.bib)
  • Bookends (.ris)
  • EasyBib (.ris)
  • EndNote (.enw)
  • EndNote 8 (.xml)
  • ISI WoS (.isi)
  • Medlars (.medlars)
  • Mendeley (.ris)
  • MODS (.xml)
  • Papers (.ris)
  • RefWorks (.txt)
  • RefManager (.ris)
  • RIS (.ris)
  • MS Word (.xml)
  • Zotero (.ris)
    • Open full article

    References

    1. Borio, C. E., McGuire, P. (2004). Twin Peaks in Equity and Housing Prices? BIS Quarterly Review, March 2004.
    2. CNB (2015). Financial Stability Report 2014/2015. Czech National Bank.
    3. EC (2015). Taxation Trends in the European Union. Brussels: European Commission.
    4. ECB (2011). Tools for Detecting a Possible Misalignment of Residential Property Prices from Fundamentals, ECB Financial Stability Review, June, 57-59. Available at: https://www.ecb.europa.eu/pub/pdf/other/financialstabilityreview201106en.pdf?ca1988c47a4dbc7481990256bb50fd88
    5. Égert, B., Mihaljek, D. (2008). Determinants of House Prices in Central and Eastern Europe, CNB Working Paper Series No. 1/2008.
    6. ESRB (2014). The ESRB Handbook on Operationalising Macro-prudential Policy in the Banking Sector. Frankfurt am Main: European Systemic Risk Board.
    7. Frait, J., Komárková, Z. (2011). Financial Stability, Systemic Risk and Macroprudential Policy. Financial Stability Report 2010/2011, Czech National Bank, 96-111. Available at: http://www.cnb.cz/en/financial_stability/fs_reports/fsr_2010-2011/fsr_2010-2011_article_1.pdf
    8. Gimeno, R., Martinez-Carrascal, C. (2010). The Relationship between House Prices and House Purchase Loans: The Spanish Case. Journal of Banking & Finance, 34(8), 1849-1855, http://dx.doi.org/10.1016/j.jbankfin.2009.12.011 Go to original source...
    9. Himmelberg, C., Mayer, C., Sinait, T. (2005). Assessing High House Prices: Bubbles, Fundamentals, and Misperceptions. National Bureau of Economic Research Working Paper No. 11643. Go to original source...
    10. Hlaváček, M., Komárek, L. (2009). Housing Prices Bubbles and Their Determinants in the Czech Republic and its Regions. Czech National Bank Working Paper 12/2009.
    11. Hlaváček, M., Komárek, L. (2010). Rovnovážnost cen nemovitostí v České republice. (Equilibrium Development of Housing Prices in the Czech Republic), Politická ekonomie, 58(3), 326-342, http://dx.doi.org/10.18267/j.polek.733 Go to original source...
    12. Hlaváček, M., Komárek, L. (2011). Regional Analysis of Housing Price Bubbles and Their Determinants in the Czech Republic. Czech Journal of Economics and Finance, 61(1), 67-91. Available at: https://www.cnb.cz/en/research/research_publications/cnb_wp/2009/cnbwp_2009_12.html
    13. Iacoviello, M. (2002). House Prices and Business Cycles in Europe: A VAR Analysis. Boston College Working Papers in Economics Vol. 540.
    14. Kajuth, F., Knetsch, T. A., Pinkwart, N. (2013). Assessing House Prices in Germany: Evidence from an Estimated Stock-Flow Model Using Regional Data. Deutsche Bundesbank Discussion Paper No. 46/2013. Go to original source...
    15. Komárek, L., Kubicová, I. (2011). The Classification and Identification of Asset Price Bubbles. Czech Journal of Economics and Finance, 61(1), 34-48.
    16. McQuinn, K. (2004). A Model of the Irish Housing Sector. Central Bank & Financial Services Authority of Ireland Research Technical Paper No. 1/RT/04. Go to original source...
    17. NBB (2012). Affordability of Housing in Belgium. National Bank of Belgium Annual Report 2012, 105-106.
    18. Nobili, A. Zollino, F. (2012). A Structural Model for the Housing and Credit Markets in Italy. Bank of Italy Working Paper No. 887. Go to original source...
    19. Poterba, J. M. (1984). Tax Subsidies to Owner-Occupied Housing: An Asset-Market Approach. Quarterly Journal of Economics, 99(4), 729-752, http://dx.doi.org/10.2307/1883123 Go to original source...
    20. Schneider, M. (2013). Are Recent Increases of Residential Property Prices in Vienna and Austria Justified by Fundamentals? Monetary Policy & The Economy Q4/2013, OeNB. Available at: https://www.oenb.at/dam/jcr.../mop_2013_q4_analyses2.pdf
    21. Tsatsaronis, K., Zhu, H. (2004). What Drives Housing Price Dynamics: Cross-Country Evidence. BIS Quarterly Review, March 2004, 65-78. Available at: http://www.bis.org/publ/qtrpdf/r_qt0403f.pdf
    22. Zhu, H. (2005). The Importance of Property Markets for Monetary Policy and Financial Stability. BIS Working Paper No. 21.

    This is an open access article distributed under the terms of the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License (CC BY NC ND 4.0), which permits non-comercial use, distribution, and reproduction in any medium, provided the original publication is properly cited. No use, distribution or reproduction is permitted which does not comply with these terms.


    Return to the content