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Volume 74, Issue 1


Easier Said than Done: Predicting Downside Risks to House Prices in Croatia

Sabol, Maja; Ċ krinjaric, Tihana

Year: 2024   Volume: 74   Issue: 1   Pages: 43-72

Abstract: House price dynamics are particularly interesting for macroprudential policymakers due to their effects on financial stability and future macroeconomic performance. As the main goal of macroprudential policy is to mitigate systemic risks, it is essential to monitor the central tendency of future house price growth dynamics and focus on downside risks and their possible materialisation. This research, the first of its kind applied to the Croatian housing market, tries to identify and capture the main drivers of house price-at-risk (HaR) for the period between 2002Q1 and 2022Q3. It also predicts downside risks to future real house price growth. Based on the quantile regression results, we conclude that downside risks on housing market have increased in recent years. The approach is found to be insightful to monitor the uncertainty of the forecasts and decomposing the drivers to house price forecasting. Our results have implications for a range of policies that influence housing markets.

JEL classification: E32, E44, E58, G01, G28, C22

Keywords: financial stability, macroprudential policy, quantile regression, growth at risk, house price dynamics, downside risks

DOI: https://doi.org/10.32065/CJEF.2024.01.02

RePEc: https://ideas.repec.org/a/fau/fauart/v74y2024i1p43-72.html

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