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The German housing market cycle: Answers to FAQs
Deutsche Bundesbank 2020.06.29 원문보기
Frequently asked questions in the analysis of housing markets are: What are the effects of changes in interest rates, income or housing supply on house prices? What is the impact of house price increases on the supply of housing? How much are house price changes due to land price changes, and what is the contribution of construction prices? How long do house price fluctuations last? When addressing these questions, the interaction between the price and supply of housing in response to shocks needs to be taken into account, as a housing boom or bust can be reflected in price changes, or a supply reaction, or a combination of both. This interaction channel may influence the direction, size and time profile of the price and supply responses to shocks, with a supply reaction potentially mitigating or exacerbating the price response. Macroeconomic models of the housing market featuring a feedback between prices and quantities exist for many advanced or emerging economies using different classes of models, such as traditional macroeconomic models (e.g. Antipa and Lecat, 2010; Grimes and Aitken, 2010; Nobili and Zollino, 2017; Steiner, 2010), DSGE models (e.g. Aspach-Bracons and Rabanal, 2010; Iacoviello and Neri, 2010) or structural vector autoregressions (e.g. Bian and Gete, 2015; Fry, Martin and Voukelatos, 2010; Jarocinski and Smets, 2008; Lastrapes, 2002; Musso, Neri and Stracca, 2011). Against this background, it is striking that results on the characteristics of the German housing market hardly exist. Even as German house prices have been increasing strongly following the Great Recession, little is known about the characteristics of the German housing market cycle. An important reason might be the lack of a long series for aggregate house prices in Germany. While there are quality-adjusted transactions-based quarterly house price data for the period starting in 2003, a house price index for the whole country is not available prior to 2003. At the same time, the period since 2003 might not be sufficient to cover a full housing cycle in Germany.

[1] The house price index by Destatis, the Federal Statistical Office, goes back to 2000, but is not representative for the whole country before 2014 (Destatis, 2018). [2] House price data for a set of German cities going back to 1991, available at the Bank of International Settlements (BIS) or OECD, suggest that house prices in German cities exhibit fairly long cycles. In the cities, house prices reached their previous peak in the mid-1990s and their latest trough in 2007/2008.

This paper aims to fill these gaps by, first, proposing a novel aggregate price index for housing in Germany following Davis and Heathcote (2007), which goes back to 1993 and is based on official statistical data. This approach avoids both the limitations resulting from a short sample period for aggregate house prices, and those from a house price series with partial coverage of Germany. We use the novel house price index in a small.
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