Housing Prices and Macroeconomic Factors: Prospects within the European Monetary Union

Abstract

This study analyses the dynamic effects of specific macroeconomic variables (i.e. housing loan rates, inflation and employment) on the price of new houses sold in Greece. An error correction vector autoregressive (ECVAR) model is used to model the impact of the macroeconomic variables on real housing prices. Variance decompositions show that the housing loan rate is the variable with the highest explanatory power over the variation of real housing prices, followed by inflation and employment.Expected Returns, Prepayment