Impact of Macroeconomic Variables on Housing Prices in Saudi Arabia: A VAR Approach

Abstract

This paper examines how housing prices are determined by macroeconomic factors in Saudi Arabia, namely, Gross Domestic Product Per capita (GDPP), Consumer Prices Index (CPI), and Unemployment Rate (UNEMP). Quarterly data for a period (2014q1 – 2019q4) were collected from publications of Saudi Arabian Monetary Authority (SAMA). Vector Autoregression Analysis (VAR) is employed to capture the dynamic effect of the variables on housing prices. Granger Causality, Variance Decomposition and Impulse response function are also used. The results show that housing prices are insignificantly and positively related to GDPP, whereas it is negatively related to both (CPI & UNEMP). Only CPI has a significant relationship. The three variables, jointly, have Granger causality on HPI. Variance decompositions show that CPI is the variable with the highest explanatory power over the variation of housing prices, followed by GDPP and the UNEMP respectively indicating that CPI is the most influential determinants for housing prices.

Türki̇ye’de Konut Kredi̇si̇ Hacmi̇ İle Seçi̇lmi̇ş Makroekonomi̇k Faktörler Arasindaki̇ İli̇şki̇ni̇n Değerlendi̇ri̇lmesi̇

“…Kentleşme, nüfusun yaş yapısı, fiyat-gelir oranı, fiyat-kira oranı ve GSYİH, döviz kuru ve enflasyon oranı gibi önemli makroekonomik değişkenlerin konut fiyatlarını istikrara kavuşturmak için çok önemli olduğu analiz sonuçlarına göre ortaya çıkmıştır. Ahmed (2020), Suudi Arabistan'da konut fiyatlarının kişi başına gayri safi yurtiçi hasıla, tüketici fiyatları endeksi ve işsizlik oranı gibi makroekonomik faktörler arasındaki ilişkiyi incelemiştir. Çalışmasında, 2014-2019 yıllarında üç aylık veriler alınmış ve vektör otoregresyon analizi (VAR), Granger nedensellik, varyans ayrıştırma ve etki-tepki fonksiyonları belirlenmiştir.…”

House prices and COVID-19 pandemic shocks in India: a nonlinear ARDL analysis

“…The HPI is used as a proxy for housing prices, similar to Ahmed (2020), Aliefendioglu et al (2021), Gholipour (2013), Katraklidis and Trachanas (2012), Korkmaz (2020), Mohan et al (2019) and Parrikar (2019). The consumer price index is used as a proxy for inflation, and GDP proxies for income.…”

“…The study explained that housing prices have a direct influence on the change in income, property gain taxes and population. Ahmed (2020) found GDP had a positive impact on housing prices, while an increase in inflation and unemployment causes a decrease in housing prices in Saudi Arabia.…”

“…The consumer price index is used as a proxy for inflation, and GDP proxies for income. Various studies indicated CPI and GDP are significant variables affecting housing prices (Ahmed, 2020;Chen et al, 2017;Katraklidis and Trachanas, 2012;Korkmaz, 2020;Parrikar, 2019;Rehman et al, 2020). CPI and GDP are used as two control variables, along with two dummies to understand the asymmetric impact of all these on the housing prices of India.…”

Factors affecting residential land prices A review of the literature

“…Considered as an essential provider of socioeconomic development in any economy, land and real estate have become an instrument of growth in many countries. This sector assists in creating new job opportunities and playing other vital economic roles (Ahmed, 2020). The relationship between land supply and demand determines the residential land prices while commodity housing create its demand.…”