||What drives Estonian housing market cycles ?
||Kolbre, Ene; Veronika Aus, Kristian Kahre
||Housing market dynamics similarly to economic environment are cyclical, which inevitably leads to highs and lows in housing market prices. The purpose of this study was to find out in which market cycle phase Estonian housing market currently is in; which factors drive Estonian housing market price movements. Analysis in this study is based on housing markets’ demand and supply models, ratio analysis and regression analysis. As Estonian housing market is relevantly young capital market starting from the beginning of 1990s, it is also a reason why only studying historic data in Estonia is not enough to receive anticipated information about the housing market’s determinants. This study also collates other European counties’ housing market cycle phases with Estonian.The results of this study brought out a long line upward trend from the beginning of the 1990s until 2007 in Estonian housing market, which was driven by economic development, consumer’s expectations and easily accessible credit. Increasing housing prices made it possible for households to borrow more using housing wealth as collateral. In Estonian housing market and also in other countries, the financial sector has most of the times directly or indirectly been the main force behind the housing booms and crises. Added features here have also been poor monetary policy and government policies which encourage affording homeownership. In year 2007 real estate bubble in Estonia burst and from that time until 2010 a rapid decrease in prices followed. The situation in housing market stabilized at the end of 2010, moved into slow growth in 2011 and into fast growth phase in 2012. This study shows that compared to previous housing bubble, the situation has improved and there is not a housing boom currently in Estonian housing market.
|Year of publication:
Kolbre, Ene; Veronika Aus, Kristian Kahre (2014).
What drives Estonian housing market cycles ?. 21st Annual European Real Estate Society Conference in Bucharest, Romania,