Open AccessHousing market in Israel: Is there a bubble?
Author(s) -
Philip Arestis,
Ana Rosa Gonzalez-Martinez
Publication year - 2017
Publication title -
panoeconomicus
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.289
H-Index - 14
eISSN - 2217-2386
pISSN - 1452-595X
DOI - 10.2298/pan1701001a
Subject(s) - economics , house price , order (exchange) , bubble , population growth , economic bubble , population , interest rate , macroeconomics , monetary economics , econometrics , finance , demography , sociology , parallel computing , computer science
House prices in Israel have registered unprecedented growth rates in the last few years. At first glance, these hikes could be explained by the evolution of fundamentals such strong population growth and favourable macroeconomic conditions, i.e. low interest rates. However, further investigation is needed in order to explore whether there is a misalignment between house prices and their fundamentals. Firstly, this paper investigates the role of construction costs in the evolution of house prices. Secondly, this contribution decomposes the “price-to-rent” ratio into fundamentals, frictions and bubble episodes for a better understanding of the recent trends of the market