Title: Regime changes in housing prices' reaction to macroeconomic variables in emerging African market

Authors: Adefemi A. Obalade; N. Dludla; R. Nhlapho

Addresses: School of Business and Finance, University of the Western Cape, Private Bag X17, Robert Sobukwe Rd., Bellville, Bellville South, South Africa ' School of Accounting, Economics and Finance, College of Law and Management, University of KwaZulu-Natal, Westville Campus, Bag X 5400, Durban 4000, South Africa ' School of Accounting, Economics and Finance, College of Law and Management, University of KwaZulu-Natal, Westville Campus, Bag X 5400, Durban 4000, South Africa

Abstract: Understanding the functioning of the housing market in relation to the economy remains an important task. This study employs a Markov switching model to investigate the effect of selected macroeconomic variables on the housing prices in South Africa for the 1999-2020 period. The results indicate that the bear regime is more persistent than the bull regime in the housing market. The effects of interest rates, unemployment, and inflation are regime-dependent, while the effects of exchange rate, money supply, GDP and rent on housing prices are invariable. Housing prices are an increasing function of rent irrespective of the regime. Key macroeconomic variables such as the unemployment, GDP and interest rate were found to have a negative impact on housing prices. The findings of this study have implication for global housing markets as failure to consider the possibility of changing regime in the housing market was one of the reasons for the global financial crisis in 2007/2008.

Keywords: inflation; interest rates; gross domestic product; GDP; exchange rate; money supply; rent; unemployment.

DOI: 10.1504/IJEPEE.2024.142474

International Journal of Economic Policy in Emerging Economies, 2024 Vol.20 No.3/4, pp.278 - 286

Received: 01 Mar 2022
Accepted: 29 May 2022
Published online: 04 Nov 2024 *

Full-text access for editors Full-text access for subscribers Purchase this article Comment on this article