Housing prices in South African economy: Investigating macroeconomic drivers using time-varying approach

Abstract

Despite being one of the least liquid assets, housing is unarguably the most significant asset class and the biggest contributor to household wealth. The goal of the current empirical research is to examine the macroeconomic drivers of housing prices. Thus, the study examines the impact of macroeconomic variables and oil prices on housing prices using monthly time series data from 2003(M1) to 2023(M3). Generalized Autoregressive Score Model (GAS) is employed to appraise the time-varying relationships between housing prices and macroeconomic variables, as well as housing prices and oil prices. The findings resulting from the empirical analysis indicate that the housing market in South Africa is substantially influenced by macroeconomic factors and oil prices. Therefore, the South African government and policy makers must maintain strong macroeconomic policy formulation and environment as they have an impact on housing prices, which, in turn, have an impact on the welfare and quality of life of the populace.