Abstract
Abstract In this paper, the authors construct a unique data set of Internet offer prices for flats in 48 large European cities across 24 countries. The data collected between January and May 2012 from 33 websites, are drawn from Internet advertisements of dwellings. Using the resulting sample of more than 1,000,000 announcements, the authors compute the quality-adjusted city-specific house prices. Based on this information, they investigate the determinants of the apartment prices. Four factors are found to be relevant for the dwelling price level using Bayesian Model Averaging: Population density, mortgage per capita, income inequality, and unemployment rate. The results are robust to applying two alternative estimation techniques: OLS and quantile regression. Based on the auhors´ estimation results they are able to identify cities where the prices are overvalued. This is a useful indication of a build-up of house price bubbles.
Highlights
Though the housing market affects the life of virtually every person, statistical data on flat prices are scarce
Housing markets are very heterogeneous, for instance, urban and rural areas or economically striving and ailing regions can hardly be described by a common indicator
House prices can be decomposed in two elements—one reflecting the fundamental value, determined by future rental income and another that is related to potentially speculative motives
Summary
Though the housing market affects the life of virtually every person, statistical data on flat prices are scarce. Statistical agencies typically report time series of housing markets only on a national level and in form of indices.. There are only few studies in this context, that use urban prices in levels Still, they only cover data of one country, not making use of international heterogeneity. Using data collected by a private company for more than 400 regions in Germany in the period from 2004 through 2012, they capture the entire spatial variation of the German housing market. They find a substantial overvaluation of up to 25% in some metropolitan areas
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