Monetary policy and real estate prices: a disaggregated analysis for Switzerland

Berlemann, Michael; Freese, Julia

doi:10.1007/s10368-012-0222-7

Cited by 12 publications

(12 citation statements)

References 56 publications

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“…Moreover, all find evidence that monetary policy influences house prices. A recent study for Switzerland by Berlemann and Freese (2013) analyzes the link between interest rates, house prices and stock prices. Other studies focus on the effect of other macroeconomic variables on house prices.…”

Section: Theoretical Considerations About the Datamentioning

confidence: 99%

House prices and interest rates: Bayesian evidence from Germany

Hanck

Prüser

2020

Applied Economics

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This study uses a Bayesian VAR to demonstrate that the recent house price boom in Germany can be explained by falling interest rates and that higher interest rates are likely suciffi ent to stop the increase of German house prices. The latter suggests a potential drawback of the current monetary policy of the ECB. The BVAR's prior information shrinks the model parameters towards a parsimonious benchmark. We provide a simulation study to compare the frequentist properties of two useful strategies to select the informativeness of the prior. The study reveals that prior information helps to obtain more precise estimates of impulse response functions in small samples. To choose relevant control variables, we use a new Bayesian variable selection approach by Ding and Karlsson (2014). In addition to impulse responses and variance decompositions, we use a Bayesian conditional forecast to test the hypothetical eff ect of an increase of interest rates on house prices. This approach has the crucial advantage that it is invariant to the ordering of the variables.

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Section: Theoretical Considerations About the Datamentioning

confidence: 99%

House prices and interest rates: Bayesian evidence from Germany

Hanck

Prüser

2020

Applied Economics

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“…While the impulse responses decline from their peak effects (which are observed after one 22 Such a persistence in responses has repeatedly been reported in the literature. Berlemann and Freese (2013) find that interest rate effects on different kind of housing are rather persistent, and lose their significance 3-4 years after the shock. The peak effect in levels is reached after 2 years.…”

Section: Time Variationmentioning

confidence: 84%

“…4 Using vectorautoregressions on a sample ranging from 1987, Berlemann and Freese (2013 find that positive interest rate shocks have adverse effects on house and condominium prices. They provide a nice overview of the Swiss real estate market.…”

Section: Introductionmentioning

confidence: 99%

Time-Varying and Regional Dynamics in Swiss Housing Markets

Drechsel

Funk

2017

Swiss J Economics Statistics

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Summary In light of the strong increase of house prices in Switzerland in the 2000s and early 2010s, we analyze the effects of mortgage rate shocks, changes in housing demand & supply and business cycle conditions on house prices for the time period 1982–2013. We study intertemporal effects by employing Bayesian timevarying coefficients vector autoregressions (TVC-BVAR), regional effects by using regional BVARs and heterogeneity in housing markets by looking at housing segments. 50 % of house price variations can be explained by housing demand & supply. The response of house prices to mortgage rate shocks weakened after the 1990s real estate crisis and remained constant thereafter. However, owneroccupied apartment prices became again more sensitive to mortgage rate shocks during the recent house price boom. Regional effects are especially prevalent for regions Zurich and Geneva.

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“…Demary (2008) confirmed the real interest level, together with the GDP, as the most important impact factors for property prices, while their impact weight differs throughout international comparisons. For instance, Berlemann and Freese (2010) argue that, for the specific case of Switzerland in the year 2010, commercial property prices showed no reaction towards a variation in the interest rate level. In a meta-study, Kuttner (2012) ultimately identified several reasons, how the interest rate does impact property prices, for instance due to changes in the willingness to take risks by investors or owners, but generally finds that the effect of the interest rate on house prices is rather moderate.…”

Section: Review Of Literaturementioning

confidence: 99%

Office properties through the interest cycle

Hahn

Keil

Wiegelmann

et al. 2016

Journal of Property Investment &Amp; Finance

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Purpose – The purpose of this paper is to estimate the impact of changes in macro-economic conditions going forward, focusing on a change in interest policy, with regard to office letting and investment markets. Design/methodology/approach – For this analysis, the authors constructed two vector-autoregressive models, measuring the response of office rents and capital values in Germany to economic impulses. The authors isolated effects of unique exogenous positive shocks (such as economic growth or interest leaps) on the basis of impulse-response functions in order to understand the complex dynamic interdependence between several economic factors and office performance changes. Findings – The authors initially find a moderately positive development of both office performance components even although supposing an increase in interest level. In terms of capital values, the authors find that they do not drop before 1.5 years after the interest impulse and the negative effect peaks after approximately nine quarters. Furthermore, the reaction to a change in GDP is significantly lower than a reaction to the interest rate, but impulses in other macro-economic factors provoke stronger reactions. Finally, the authors find that a positive interest shock leads to a comparably robust development and economic sustainability in office rents throughout a consideration horizon of 24 quarters. Research limitations/implications – Estimations are based on observations from a time period containing two rather extraordinary market phases. As they included bubble growth and the low-interest environment, the authors find that certain patterns in both phases neutralize each other when looking at the total time frame. The authors constructed sub-samples to compensate for this. However, the research does not provide to what extent the measured impulse-responses stay forecast-proof, if the market moves into a phase of short-term normalization. Practical implications – This paper provides insights into estimated impulse-response patterns on a hypothetical sudden increase of several macro-economic determinants. On this basis, the probable reaction to an increase in, for example, the interest rate level can be approximated. Also, the paper provides a fundamental understanding of the economic sustainability of German office properties in terms of their value and rent performance in the case of exogenous shocks. Originality/value – This paper contains the first vector-autoregressive, impulse-response analysis of office markets in Germany in the context of several macro-economic drivers, including the interest level. It delivers insights into market reaction patterns on the basis of simulated one standard deviation shocks in all included variables.

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Monetary policy and real estate prices: a disaggregated analysis for Switzerland

Cited by 12 publications

References 56 publications

House prices and interest rates: Bayesian evidence from Germany

House prices and interest rates: Bayesian evidence from Germany

Time-Varying and Regional Dynamics in Swiss Housing Markets

Office properties through the interest cycle

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