Cyclical Relationships Between GDP and Housing Market in France: Facts and Factors at Play

Abstract

In this paper we focus on cycles and trends of some macroeconomic and housing market variables representative of the French economy. In a first part, we empirically show that cycles in the housing sector, measured by housing prices, housing starts, building permits, sales or residential investment, are strongly correlated to GDP cycles with a lead lying between of one and four quarters, suggesting thus that a monitoring of housing fluctuations could bring useful information for macroeconomic forecasting. Interestingly, this result is robust to the various considered approaches. Moreover, it seems that the housing sector long-term trend possesses its own dynamics, quite different from the aggregate French economic activity. Thus, in a second part, we review various structural factors that could drive housing market developments in France in the future.