This study set out to investigate the relationship between returns in the
residential property markets and two key economic variables of output and
interest rates. The main focus was on the short-term rates path and how it is
influenced by the Taylor rule fundamentals and in turn, its effect on the returns
in the property markets within the developing countries of South Africa,
Bulgaria, Lithuania and Czech Republic. A secondary focus was on building a
model that can be further developed into a full forecasting model of returns in
the residential property markets.
Output was found to be a strong driver of returns in the residential property
markets across all four countries. Real changes in the economic activity feed
into the residential property markets and drives returns. Output can be
incorporated into a forecasting framework for returns in the residential property
markets within these countries
The short-term rate paths within the countries studied were found to be
consistent with the Taylor rule but with heavy short run deviations from the rule.
Short-term rates deviated from the rule in the short run, but showed a tendency
to revert to the rule in subsequent periods.
Returns and prices in the property markets were driven by the short-term rates
only in two of the emerging markets. For these countries, this link between rate
and returns mean there was also a link between monetary policy and returns in
the property sector. Similar to the Taylor rule process, property returns in the
two emerging markets were found to have short run deviations which could not
be explained by interest rates and output.
For the purposes of building a fully fledged forecasting model, this model must
be expanded to include other explanatory factors. Adding the risk premium as
an explanatory variable could be the starting point.
| Identifer | oai:union.ndltd.org:netd.ac.za/oai:union.ndltd.org:wits/oai:wiredspace.wits.ac.za:10539/14909 |
| Date | 15 July 2014 |
| Creators | Gumede, Ofentse |
| Source Sets | South African National ETD Portal |
| Language | English |
| Detected Language | English |
| Type | Thesis |
| Format | application/pdf |
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