House Price Risk and Sub-District House Price Dynamics

Abstract

The recent Global Financial Crisis has lent even greater urgency to the need for households to understand the risks and dynamics of the residential property market better. This paper uses a rich dataset on individual residential property transactions between 1995 and 2014 in Amsterdam to study the risks and the inter-dependency of house prices in the sub-district housing markets. The paper also examines the impact of house price growth in Amsterdam on the wider national trend. Simple summary statistics are adopted to characterise the dynamics and to compute the risks, while the inter-dependencies and the city-wide impact are analysed using Granger causality and cointegration techniques. The analysis establishes that house prices are generally higher, growing at faster and more volatile rates as we move from the peripheral to the districts into the central area. Furthermore, the appreciation rate of property prices in Amsterdam has a significant impact on the national trend, while there is limited systematic inter-dependency among the sub-markets themselves.