South African house-price dynamics

Motivated by concerns that a speculative price bubble may have formed in the South African house market, this paper examines South African house-price dynamics over a three-decade period spanning 1976 to 2005. Estimation of error-correction models reveals that real changes in the prices of medium- and large-sized South African homes are associated with short-run changes in economic growth, real mortgage rates and sovereign risk. Empirical analysis suggests that the real prices of small-sized homes are not associated with real mortgage rates in the short run. Estimation of the house-price models also revealed that property prices exhibit mean reversion in the long run, although adjustment to long-run equilibrium (governed by economic growth, real mortgage rates and sovereign risk) is slow.

Grantor dc:publisher.institution

School of Economics

Year dc:date.issued

2007

Author dc:creator

• Hutchings, Bradley

Advisor dc:contributor.advisor

• Barr, Graham

Language dc:language.iso

eng

Handle dc:identifier.uri

http://hdl.handle.net/11427/5799

OAI identifier oai:identifier

oai:open.uct.ac.za:11427/5799