Convergence in Provincial‐level South African House Prices: Evidence From the Club Convergence and Clustering Procedure

Abstract

This empirical study analyzes the long run behavior of provincial house prices in South Africa based on the club convergence and clustering procedure of Phillips and Sul. Using quarterly data covering the period of 1976Q2-2012Q4, 1974Q1-2012Q4 and 1977Q3-2012Q4 for the large, medium, and small middle segments of the housing market, respectively, we test the law of one price across nine provinces. The empirical findings suggest that the nine provinces do not form a homogeneous convergence club. Unlike the small middle segment, which consists of two convergence clubs of seven and two provinces, the large and medium middle segments have three convergence clubs corresponding to three segmented independent local markets. Possible intuitive explanations for the existence of such clubs are discussed and resulting policy implications provided.

Testing for overall and cluster convergence of housing rents using robust methodology: evidence from Polish provincial capitals

“…In the literature, a number of arguments can be found for the possibility of the convergence of sales/rental prices between spatially separated residential markets. In particular, as Apergis et al ( 2015 ) point out, price convergence may be a consequence of the so-called ripple effect, which postulates the easy transfer of price shocks between property markets, due to existing population, labour market and financial capital mobility. It should be stressed that the occurrence of the ripple effect in the housing market has been empirically confirmed by studies conducted by Tomal ( 2020a ) and Brzezicka et al ( 2019 ), among others.…”

“…The empirical research to date in this area is not very extensive, and to the best of the author's knowledge only several such analyses have been developed. In particular, studies on the presence of convergence clubs in the residential market have been conducted in the USA (Kim and Rous 2012 ; Apergis and Payne 2012 , 2019 , 2020 ; Montañés and Olmos 2013 ), China (Meng et al 2015 ; Lin et al 2015 ; Zhang et al 2017 ; Hu et al 2020 ), the UK (Montagnoli and Nagayasu 2015 ; Holmes et al 2019 ), Spain (Blanco et al 2016 ), Australia (Awaworyi Churchill et al 2018 ), South Africa (Apergis et al 2015 ) and Poland (Matysiak and Olszewski 2019 ; Tomal 2019a , 2020a ). It should be noted that almost all of the above studies analysed the convergence of sales prices in the residential market.…”

The Ripple Effect and Spatiotemporal Dynamics of Intra-Urban Housing Prices at the Submarket Level in Shanghai, China

“…Drake [44] finds clear regional differences in the pattern of UK house price movements. Subsequently, researchers investigated this phenomenon under the framework of convergence clubs [56][57][58][59][60][61][62][63][64][65][66] and usually with the help of the clustering procedure of Philips and Sul [67]. Most existing studies explored the convergence clubs at the provincial/state or inter-urban scales.…”

“…Tomal [60] discovered a U-shape pattern of convergence, and three convergence clubs on both primary and secondary markets in Poland. Apergis et al [61] found that South Africa's housing market can be divided into two convergence clubs. Empirical evidence also supports the existence of heterogeneous convergence clubs in China.…”

Price dispersion across Indian states: A club convergence analysis

“…The PS methodology is well considered in the literature in examining various issues such as the income convergence (Ghosh, Ghoshray, & Malki, 2013), electricity convergence (Jangam, Sahoo, & Akram, 2019), and output convergence (Akram, Sahoo, & Rath, 2019). Further, studies by Apergis and Payne (2012), Apergis, Simo‐Kengne, and Gupta (2015), Tsai (2018) and Jangam and Akram (2019) have considered PS methodology in examining the convergence in prices 1…”