MACROECONOMIC VARIABLES INFLUENCING HOUSING PRICES IN VILNIUS

Alfredas Laurinavičius,Algimantas Laurinavičius,Antanas Laurinavičius

doi:10.3846/ijspm.2021.15961

Alfredas Laurinavičius, Algimantas Laurinavičius + Show 1 more

Open Access

https://doi.org/10.3846/ijspm.2021.15961

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Abstract

The way macroeconomic variables such as unemployment/GDP per capita/inflation/wages/internal migration influenced housing prices (nominal house prices and housing rent prices) in Vilnius in 2006–2019 has been investigated in the research. Conditions under which different macroeconomic variables could influence housing prices were established in the research. Lower unemployment, higher GDP per capita and inflation rate were all related to higher nominal house prices in Vilnius. Higher GDP per capita, wages and internal migration were positively related to housing rent prices in Vilnius. Analyzed macroeconomic variables all together explained 88 percent of variance of nominal house prices in Vilnius over the period of 2006–2019 and 80 percent of variance of housing rent prices in Vilnius over the same period.

Highlights

Pace of economic development of Lithuania was very rapid though even more uneven in last decades
Using the metropolitan area as the unit of analysis, Saiz (2007) finds that immigration flows raise house prices and rents: immigration volumes on the order of 1% of total population raise these 1.0% and 2.9–3.4%, respectively. As it is shown in chapters, we find the increase of rent prices even bigger for Vilnius
Housing rent prices are represented in euros per square metre (EUR/sqm) per month and nominal house prices in EUR/sqm are divided by 200 to better correspond the scale of Figure 1

Summary

Introduction

Pace of economic development of Lithuania was very rapid though even more uneven in last decades. Liu and Ma (2021) assessed determinants of housing prices in China Their finding suggests that land price, loans of real estate developers, per capita saving and the proportion of people with college or above educational degrees significantly drive up house prices, while the number of unemployed population has a significant negative impact. These five variables account for 72% of variance in house prices across the country. Other economic fundamentals such as inflation, interest rate, gross domestic product (GDP) per capita, and rent cost do not have significant influences on house prices.

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