Title: House prices and real estate bubbles in Brazil: an analysis through Johansen cointegration

Authors: Cássio Roberto Leite Netto; Luiz Paulo Lopes Fávero; Janilson Antonio Da Silva Suzart

Addresses: School of Economics, Business and Accounting, University of São Paulo, Av. Prof. Luciano Gualberto, 908 – FEA 3 – Cidade Universitária, São Paulo – SP, Brazil ' School of Economics, Business and Accounting, University of São Paulo, Av. Prof. Luciano Gualberto, 908 – FEA 3 – Cidade Universitária, São Paulo – SP, Brazil ' School of Economics, Business and Accounting, University of São Paulo, Av. Prof. Luciano Gualberto, 908 – FEA 3 – Cidade Universitária, São Paulo – SP, Brazil

Abstract: This article presents a long-term role model of a house price index through Johansen cointegration. Variables linked to the real estate market were used to verify the existence of a long-term relation with the house price index formulated by FipeZap, a very important Brazilian institution. The model was then used to evaluate the possible existence of real estate bubbles in residential properties in the markets of São Paulo and Rio de Janeiro, showing the absence of a representative bubble in São Paulo, but overvalued prices in Rio de Janeiro. Over the analysed period (2008-2013), prices have risen quite a lot in both markets, but show the latest trend of convergence towards the fundamentals.

Keywords: Johansen cointegration; housing bubbles; real estate markets; Rio de Janeiro; Sao Paulo; Brazil; house price index; house prices.

DOI: 10.1504/IJADS.2015.074619

International Journal of Applied Decision Sciences, 2015 Vol.8 No.4, pp.339 - 357

Available online: 08 Feb 2016 *

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