Platon Monokroussos
Greece Macro Monitor (10 Μarch 2014)
Explaining and forecasting residential house prices in Greece
A technical note
The present paper – which please see herebelow, utilizes cointegration analysis and a vector error correction model (VECM) to explain and forecast residential house prices in Greece, based on quarterly data spanning the period Q1 1995 to Q4 2013. In line with a number of earlier empirical studies, we document the existence of a cointegration relationship, which links real house prices, real GDP, the real mortgage loan rate and inflation. Furthermore, our VECM estimates suggest that, in the long-run, housing prices are positively related to real GDP and negatively related to both real lending rates and inflation. Finally, an out-of-sample forecasting exercise based on the estimated VECM coefficients points to a further decline in nominal residential house prices by between 6 and 12 percent, with a bottoming out of the recession in the domestic residential property market expected by early 2015 under the assumed baseline scenario (and by early 2016, under an adverse scenario).
Explaining and forecasting residential house prices in Greece (March 10, …
