Open AccessReal estate boom in Chile and fundamentals on house prices
Author(s) -
Cristóbal Aguilera Alvial
Publication year - 2020
Publication title -
finance, markets and valuation
Language(s) - English
Resource type - Journals
ISSN - 2530-3163
DOI - 10.46503/bbhd9810
Subject(s) - boom , real estate , spurious relationship , economics , house price , price index , index (typography) , economic bubble , econometrics , financial economics , monetary economics , macroeconomics , finance , mathematics , engineering , computer science , statistics , environmental engineering , world wide web
This article studies the fundamentals of housing prices based on the Real Index of Housing Prices (IRPV), given that in recent times in Chile there has been a sustained increase in price levels and seeks to find evidence on the existence of a possible speculative bubble in the real estate market. Following the methodology of various Chilean and international authors, the Engle & Granger Co-integration methodology was applied. Furthermore, the results of the previous methodology were compared using the Johansen Co-integration test. Then a method to find structural breaks is applied. As a result, evidence is found to not reject the existence of a bubble in the real estate market. It is found that only interest rates co-integrate in the long term with the evolution of house prices, while the other fundamentals present a spurious relationship.