Regional Analysis of Real Estate Bubbles in the Czech Republic

• Název práce v češtině: Regionální analýza realitních bublin v České republice
• Název v anglickém jazyce: Regional Analysis of Real Estate Bubbles in the Czech Republic
• Klíčová slova: ceny nemovitostí, cenové bubliny, fixní efekty, model korekce chyb, regionální data, panelová studie, Česká republika
• Klíčová slova anglicky: real estate prices, price bubbles, fixed effects, error correction model, regional data, panel study, Czech Republic
• Akademický rok vypsání: 2017/2018
• Typ práce: bakalářská práce
• Jazyk práce: angličtina
• Ústav: Institut ekonomických studií (23-IES)
• Vedoucí / školitel: Mgr. Petr Polák, M.Sc., Ph.D.
• Řešitel: skrytý - zadáno vedoucím/školitelem
• Datum přihlášení: 06.06.2018
• Datum zadání: 07.06.2018
• Datum a čas obhajoby: 10.09.2019 09:00
• Místo konání obhajoby: Opletalova - Opletalova 26, O206, Opletalova - místn. č. 206
• Datum odevzdání elektronické podoby: 28.07.2019
• Datum proběhlé obhajoby: 10.09.2019
• Oponenti: Mgr. Matěj Opatrný, Ph.D.

Seznam odborné literatury

Hlaváček, Michal, and Luboš Komárek. "Rovnovážnost cen nemovitostí v České republice." Politická ekonomie 58.3 (2010)

Égert, Balázs, and Dubravko Mihaljek. "Determinants of house prices in central and eastern Europe." Comparative economic studies 49.3 (2007): 367-388

Mulford, John E. Income Elasticity of Housing Demand. Rand Corporation, 1979.

Gallin, Joshua. "The long‐run relationship between house prices and income: evidence from local housing markets." Real Estate Economics 34.3 (2006): 417-438.

Czech Statistical Office, "Ceny sledovaných druhů nemovitostí", period 2007-2016, available online: https://www.czso.cz/csu/czso/ceny-sledovanych-druhu-nemovitosti-2014-az-2016#

Green, R., & Hendershott, P. H. (1996). Age, housing demand, and real house prices. Regional Science and Urban Economics, 26(5), 465-480.

De Leeuw, F. (1971). The demand for housing: A review of cross-section evidence. The Review of Economics Statistic, 1-10.

Attanasio, O. P., Bottazzi, R., Low, H. W., Nesheim, L., & Wakefield, M. (2012). Modelling the demand for housing over the life cycle. Review of Economic Dynamics, 15(1), 1-18.

Manrique, J., & Ojah, K. (2003). The demand for housing in Spain: an endogenous switching regression analysis. Applied Economics, 35(3), 323-336.

Garcia, J., & Raya, J. M. (2011). Price and income elasticities of demand for housing characteristics in the city of Barcelona. Regional Studies, 45(5), 597-608.

Tsai, I. C. (2013). Housing affordability, self-occupancy housing demand and housing price dynamics. Habitat International, 40, 73-81.

Gary-Bobo, R. J., & Larribeau, S. (2003). The bank's market power and the interest-rate elasticity of demand for housing: an econometric study of discrimination on French mortgage data. Annales d'Economie et de Statistique, 377-398.

Předběžná náplň práce v anglickém jazyce

Research question and motivation
The purpose of the thesis is to analyze prices in the real estate market from a perspective that slightly differs from the usual point of view. In hedonic models our estimations are dependent on the characteristics of the dwelling (e.g. area, location, floor number) and the explained variable is the observed price (or price offered). I will focus on the factors that influence demand (such as income, mortgage rate, number of households) instead, even though it might be challenging. In the practical part, the thesis will focus on the regions of the Czech Republic, primarily evaluating the diversity of the real estate market in Prague in comparison with the other regions.

Contribution
The objective is to evaluate what the observed differences between Prague and the rest of the Czech Republic are, and whether they can be rationally explained from the perspective of demand. Also, in reaction to CNB considering real estate prices overvalued, I will analyze the recent trends to see whether our model suggests the same. In particular I would like to assess the adequacy of an increase in prices to an increase in income and make a conclusion about the possibility of the presence of a price bubble. To my knowledge there was a similar study performed by Michal Hlaváček and Luboš Komárek, who analyzed prices in the CR during the period of 1998-2008. Since then there has been new data published and I consider it a great opportunity to examine the recent surge in prices.
Last but not least, I will also estimate the income elasticity of demand for real-estate and its dynamics during the recent years. This could find use in understanding the impacts of imposing many public policies.

Methodology
Using multiple linear regression and panel data, the model will represent the relationship between the average prices of residential real estate and fundamentals such as income of individuals, unemployment, several demographic factors, (number of households, divorces, marriages, average age) and mortgage interest rate. I will also consider the return on investment, tenure choice, and short-term rentals (Airbnb for example).
According to data, I will focus separately on flats and family houses in each of the regions of the Czech Republic that are monitored by the Czech Statistical Office. Apart from that, important data sources are the Ministry for Regional Development, the Czech National Bank and Eurostat.

Outline
1. Introduction
2. Literature review
3. Methodology
4. Data analysis
5. Conclusion