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Volume 61, Issue 1

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Is There a Real Estate Bubble in the Czech Republic?

Zemčík, Petr

Year: 2011   Volume: 61   Issue: 1   Pages: 49-66

Abstract: Real estate prices more than doubled in many countries of Central and Eastern Europe from 2003 to 2008. In this paper, I provide one of the first assessments of whether housing prices in this region correspond to rents, i.e. to cash-flows related to an apartment purchase. State-of-the-art panel data stationarity and Granger causality techniques are employed to test the implications of the standard present value model using regional data from the Czech Republic. Apartment prices are only slightly overvalued. In addition, changes in prices are helpful in predicting changes in rents and vice versa.

JEL classification: G12; R21; R31; C33

Keywords: Central and Eastern Europe, Czech Republic, panel data, unit root, bubble, house prices, rents

RePEc: http://ideas.repec.org/a/fau/fauart/v61y2011i1p49-66.html

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