The Role of Macroeconomic Fundamentals in the Determination of House Prices

Abstract

This paper attempts to explain the variance of housing prices as a function of macroeconomic fundamentals. The analysis is based on data from six advanced countries. The sample range is from 2001-2012. A panel regression procedure is applied to the data set. The findings suggest that house prices can be interpreted as a function of macroeconomic variables. These macroeconomic variables include percentage real GDP growth, the current account and first differences in the current account as a percent of GDP, first differences in the imbalance between investment and savings, and the public debt as a percent of GDP.