House prices and bubbles in New Zealand

Research output: Contribution to journalArticle

29 Citations (Scopus)
5 Downloads (Pure)

Abstract

This paper studies actual (real) house prices relative to fundamental (real) house values in New Zealand for the period 1970-2005. Utilizing a dynamic present value model, we find disparities between actual and fundamental house prices in the early 1970s and 1980s and from 2000 to date. We model the bubble component that is related to fundamentals (the intrinsic component), making it possible to highlight whether a bubble still exists after that component is accounted for. We then analyze any remaining bubble to detect any momentum behavior. Much of the overvaluation of the housing market is found to be due to price dynamics rather than an overreaction to fundamentals.

Original languageEnglish
Pages (from-to)71-91
Number of pages21
JournalThe Journal of Real Estate Finance and Economics
Volume37
Issue number1
DOIs
Publication statusPublished - Jul 2008

Keywords

  • real house prices
  • real disposable income
  • fundamentals
  • present value
  • time-varying risk
  • bubbles
  • New Zealand
  • stock-prices
  • intrinsic bubbles
  • rational bubbles
  • real-estate
  • markets
  • model
  • risk

Cite this

House prices and bubbles in New Zealand. / Fraser, Patricia; Hoesli, Martin Edward Ralph; McAlevey, Lynn.

In: The Journal of Real Estate Finance and Economics, Vol. 37, No. 1, 07.2008, p. 71-91.

Research output: Contribution to journalArticle

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