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Paper eres2013_187:
The Sources of House Price Change: Identifying Liquidity Shocks to the Housing Market

id eres2013_187
authors Taltavull de La Paz, Paloma; Michael White
year 2013
title The Sources of House Price Change: Identifying Liquidity Shocks to the Housing Market
source 20th Annual European Real Estate Society Conference in Vienna, Austria
summary In a previous paper (Taltavull and White, 2012) we analysed the role of money supply, migration and mortgage finance in house price evolution. Using a VECM framework we examined these variables together with income, inflation, and interest rates for both Spain and the UK. This followed on from research by other authors including Muellbauer (2007), Meen and Andrew (2003), and Mishkin (1995). The results indicated an important role for income, mortgages and migration in UK house price movements, more so than in Spain. In this paper we build upon our previous work and focus on the channels through which liquidity shocks can affect house prices. Lastrapes (2002) argues that money supply affects real house prices. Greiber and Setzer (2007) find that liquidity is important for new supply and hence house prices identifying money demand, asset price and credit channels. In the money demand channel, three different effects are present, wealth, substitution and transactions effects. This permits us to test of changes in house prices lead to changes in money supply. In the asset price channel we test if changes in money supply cause house price change, and in the credit channel, higher housing collateral can increase loan amounts. In this paper we test different channels to identify which is more or less important and whether this varies across countries thus identifying the impact that the housing market has on the macroeconomy and from which source this is derived.
keywords Housing, Liquidity, Price Shocks, VECM
series ERES:conference
type paper session
discussion No discussions. Post discussion ...
session D-5: Housing Markets & Economics
last changed 2014/10/21 21:51
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