This working paper, based on an empirical analysis, discusses factors affecting property prices and tries to identify periods of property price overvaluation by three approaches: using simple ratios related to house prices (price-to-income and price-to-rent), using time series analysis for the Czech Republic as a whole, and using panel regression for the Czech regions. The time series analysis and the simple indicators of housing price sustainability identified overvalued property prices in 2002/2003 and partly also in 2007/2008. According to the time series analysis, however, the size of the housing price overvaluation in 2007/2008 was relatively low, as the rise in property prices in this period was largely explainable by fundamentals. From the regional perspective, there is a higher degree of overvaluation in regions with higher property prices. The exception is Prague, which seems to be a “specific” region.
JEL Codes: R21, R31, C23.
Keywords: Asset price bubbles, Czech Republic and its regions, housing prices, panel regression.
Issued: December 2009
Download: CNB WP No. 12/2009 (pdf, 648 kB)
Published as: Komárek, L. and Hlaváček, M. (2011): Regional Analysis of Housing Price Bubbles and their Determinants in the Czech Republic. Czech Journal of Economic and Finance, 61(1), 67-91.