Housing cycles in Switzerland: A time-varying approach

Research, Preprint English OPEN
Drechsel, Dirk (2015)
  • Publisher: Zurich: ETH Zurich, KOF Swiss Economic Institute
  • Related identifiers: doi: 10.3929/ethz-a-010431888
  • Subject: R21 | R31 | time-varying VAR | Economics | C32 | Buildings | Switzerland | house prices | GROSS NATIONAL PRODUCT; GRUNDSTÜCKPREISE + IMMOBILIENPREISE; SUPPLY AND DEMAND IN THE REAL-ESTATE MARKET; BRUTTONATIONALEINKOMMEN; SWITZERLAND (CENTRAL EUROPE). SWISS CONFEDERATION; SCHWEIZ (MITTELEUROPA). SCHWEIZERISCHE EIDGENOSSENSCHAFT; ANGEBOT UND NACHFRAGE/IMMOBILIENMARKT; HYPOTHEKEN; MORTGAGES; LAND PRICES + REAL ESTATE PRICES
    • ddc: ddc:690 | ddc:330

In light of the strong increase of house prices in Switzerland, we analyze the effects of mortgage rate shocks, changes in the interplay between housing demand and supply and GDP growth on house prices for the time period 1981- 2014. We employ Bayesian time-varying coefficients vector autoregressions to allow different monetary and immigration regimes over time. A number of structural changes, such as regulatory changes in the aftermath of the 1990s real estate crisis, the introduction of free-labor movements in the 2000s or the zero lower bound interest rate regime in the 2010s might have affected the responses of house prices to influencing factors. We investigate potential parameter changes and their importance in light of the current housing price boom. We find that 40% of house price variations can be explained by changes in demand and supply for housing. Furthermore, the response of house prices to mortgage rate shocks weakened after the 1990s real estate crisis and increased in size again during the recent house price boom.
  • References (17)
    17 references, page 1 of 2

    Assenmacher, K., and S. Gerlach (2008): “Monetary policy, asset prices and macroeconomic conditions: a panel-VAR study,” National Bank of Belgium Working Paper, (149). [back to page 4, 11, 12]

    Belke, A. H., and W. Orth (2007): “Global excess liquidity and house prices-a VAR analysis for OECD countries,” Ruhr Economic Paper, (37). [back to page 4]

    Berlemann, M., and J. Freese (2013): “Monetary policy and real estate prices: a disaggregated analysis for Switzerland,” International Economics and Economic Policy, 10(4), 469-490. [back to page 4, 11]

    Borowiecki, K. J. (2009): “The determinants of house prices and construction: an empirical investigation of the Swiss housing economy,” International Real Estate Review, 12(3), 193-220. [back to page 4]

    Bourassa, S., M. Hoesli, and D. Scognamiglio (2010): “Housing finance, prices, and tenure in Switzerland,” Journal of Real Estate Literature, 18(2), 263- 282. [back to page 4]

    Brown, M., and B. Guin (2013): How Risky are Residential Mortgages in Switzerland? Swiss Institute of Banking and Finance. [back to page 4]

    Carter, C. K., and R. Kohn (1994): “On Gibbs Sampling for State Space Models,” Biometrika, 81(3), 541-553. [back to page 8]

    Degen, K., and A. M. Fischer (2009): “Immigration and Swiss house prices,” . [back to page 4, 11]

    Del Negro, M., and F. Schorfheide (2011): “Bayesian Macroeconometrics,” The Oxford Handbook of Bayesian Econometrics, pp. 293-389. [back to page 7]

    DiPasquale, D., and W. C. Wheaton (1994): “Housing market dynamics and the future of housing prices,” Journal of urban economics, 35(1), 1-27. [back to page 5, 10]

  • Metrics
    No metrics available
Share - Bookmark