Finance, Markets and Valuation
Vol. 6, Num. 1, January-June 2020, 1--26
Title: Real estate boom in Chile and fundamentals on house prices
Authors: Cristóbal Aguilera Alvial
DOI: 10.46503/BBHD9810
Abstract:
This article studies the fundamentals of housing prices based on the Real Index of Housing Prices (IRPV), given that in recent times in Chile there has been a sustained increase in price levels and seeks to find evidence on the existence of a possible speculative bubble in the real estate market. Following the methodology of various Chilean and international authors, the Engle & Granger Co-integration methodology was applied. Furthermore, the results of the previous methodology were compared using the Johansen Co-integration test. Then a method to find structural breaks is applied. As a result, evidence is found to not reject the existence of a bubble in the real estate market. It is found that only interest rates co-integrate in the long term with the evolution of house prices, while the other fundamentals present a spurious relationship.
Keywords: Real estate bubbles; Real estate prices; Speculation; Co-integration; Structural break
