House Price Bubble Detection in Ukraine - new publication by Martin Hoesli
The purpose of Professor Hoesli's new paper is to build a framework for the assessment of the fundamental value of house prices in the largest Ukrainian cities, as well as to identify the thresholds, the breach of which would signal a bubble.
House price bubbles are detected using two approaches: ratios and regression analysis. Two variants of each method are considered. Hoesli and his co-author calculate the price-to-rent and price-to-income ratios that can identify a possible over- or undervaluation of house prices. Then, they perform regression analyses by considering individual multi-factor models for each city and by using a pooled OLS model with panel data.
The only pronounced and prolonged period of a house price bubble is the one that coincides with the Global Financial Crisis. The bubble signals produced by these methods are, on average, simultaneous and are in accordance with economic sense.
The new study is co-authored with Alona Shmygel from the National Bank of Ukraine, and is forthcoming in the Journal of European Real Estate Research.
Apr 9, 2023