Effects of Real Estate Policy on Investor Sentiment and Housing Prices during Periods of Increasing Housing Price

Abstract

This study was designed to investigate whether the response of investor sentiment to shocks in real estate policies results in differences in the stabilization effect on housing prices. For this purpose, the Vector Autoregressive (VAR) model was established by variables including housing prices, investor sentiment measured by multi-dimensions and real estate policies categorized by types. Then impulse response functions were also conducted. The results suggested that real estate policies tend to be announced in response to shift in investor sentiment, rather than being proactively introduced. It was found that investor sentiment notably decreases in response to shock from real estate policies and housing prices tend to decrease substantially in response to shocks from real estate policies when they rise significantly in response to shock from investor sentiment. This study is distinctive in terms of analysis for housing price stabilization of real estate policies as it categorized real estate policies by types and took into account multi-dimensional measurement of investor sentiment. The study is significant in its analysis of the relationships between real estate policies during periods of rapid rise in housing prices, investor sentiment and real estate policies.