Multivariate Dynamic Analysis and Forecasting Models of Future Property Bubbles: Empirical Applications to the Housing Markets of Spanish Metropolitan Cities

Felicia Di Liddo,Maria Paz Saez-Perez,Francesco Tajani,Pierluigi Morano,Marco Locurcio

doi:10.3390/su11133575

Felicia Di Liddo, Maria Paz Saez-Perez

Open Access

https://doi.org/10.3390/su11133575

Copy DOI

Abstract

The cogency of evaluation models able to predict future trends and to monitor the consequences of scenarios different from those initially expected has been determining a growing scientific interest for the development of financial sustainability methods. With reference to quarterly time series collected for the metropolitan area of five Spanish cities, in this research an innovative methodology has been implemented, in order to make explicit, for each case study, the main functional relationships between the housing prices and the socio-economic factors. The models obtained are characterized by both high statistical performance and compliance with the expected market phenomena, highlighting the decisive role in the housing price formation of the factors that indirectly represent the population’s income capacity (market rents, unemployment level, mortgages). Then, an empirical procedure for the construction of the future property value trends has been developed. The results point out the forecasting and monitoring potentialities of the methodology used, as a fundamental decision support tool in the urban planning policies of the local administrations, interested in anticipating and checking future housing bubbles through appropriate economic policies, and for private operators, in the phases of selection of the most attractive territorial areas for new property realizations.

Highlights

In the last few years, numerous researchers have studied the effects that the ongoing global crisis, triggered out by the US subprime in 2007, have determined on the economy, and on the households’ daily habits
The outputs obtained are models of simple interpretation, characterized by high statistical performance and compliance with the expected empirical phenomena, and that constitute a useful support for the forecast of the future housing market trends, generated by different evolutions of the socio-economic parameters identified by the models
The determining role of the housing market on the global economic trends and the extreme volatility that has characterized the property values in recent years have spread the need for advanced econometric models, capable of forecasting future bubbles and monitoring sudden scenario evolutions, in order to check the following effects

Summary

Introduction

In the last few years, numerous researchers have studied the effects that the ongoing global crisis, triggered out by the US subprime in 2007, have determined on the economy, and on the households’ daily habits. These phenomena have further confirmed the predominant role of the real estate sector in the economic activities of all the countries whose housing market is undoubtedly the main segment, and the peremptoriness to forecast future bubbles by appropriately measuring the changes of the economic and population fundamentals [1,2]. A dynamic analysis of the macro-economic variables that can help to foresee sudden changes of the property values, in order to anticipate future real estate bubbles, should be developed in each specific territorial context

Aim

Background

Case Study

Method

Practical Use of the Models Obtained

Conclusions