House-Prices and the Credit Market - Evidence from an International Panel of Industrialized Economies

28 Pages Posted: 14 Aug 2018

See all articles by Martin Kern

Martin Kern

FernUniversität in Hagen

Helmut Wagner

University of Hagen (Fernuniversitaet Hagen)

Date Written: July 26, 2018

Abstract

In this article, we analyze to what extent the influence of housing market determinants and especially the credit market vary across countries and time. We do this by means of an international panel data set, consisting of quarterly data for 18 industrialized countries between 1975/01 and 2017/02. Moreover, we test whether our findings hold true when controlling for periods of house-price booms and busts relative to normal phases, a structural break in 1985 (Great Moderation), as well as selected characteristics of housing finance. Five results are worth highlighting. First, house-prices are best explained by disposable income, residential investment, the unemployment rate, the credit market, a business cycle dummy, and the cpi inflation. Second, the cpi inflation and the business cycle dummy are only significant after 1985, but are insignificant before. Third, the credit market only influences house-prices in normal and boom times, and the cpi inflation only in normal and bust times. Fourth, the LTV ratio has a strong and positive impact on house-price growth, and fifth, the degree to which an increase in credit growth is passed on to the housing market is strongest in countries with high LTV ratios in normal times, and in countries with more developed secondary mortgage markets in boom times.

Keywords: Housing Cycles, House Prices, Real Estate Markets

JEL Classification: C41, E32, R30

Suggested Citation

Kern, Martin and Wagner, Helmut, House-Prices and the Credit Market - Evidence from an International Panel of Industrialized Economies (July 26, 2018). Available at SSRN: https://ssrn.com/abstract=3220328 or http://dx.doi.org/10.2139/ssrn.3220328

Martin Kern (Contact Author)

FernUniversität in Hagen ( email )

Universitätsstrasse 41
Feithstrathe 140
Hagen, 58084
Germany

Helmut Wagner

University of Hagen (Fernuniversitaet Hagen) ( email )

Universitätsstrasse 41
Feithstrathe 140
D-58084 Hagen
Germany
011-49-2331-987-2640 (Phone)
011-49-2331-987-391 (Fax)

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