Is There Financialization of Housing Prices? Empirical Evidence from Santiago de Chile

Abstract

This paper empirically examines the influence of financial factors on housing prices in Chile, given the relevance that arises from the important housing crisis that the country is going through and the scarce amount of literature on causal relationships between price and other variables for the case under study. The hypothesis is that different financial factors have a significant influence on the price of housing, while the price of housing acts as an attractor of financial investment due to its good profitability. To conduct the statistical test, a Granger causality test is applied to a weekly data series covering the years 2009–2018. The results indicate that the causality hypothesis is plausible. On the one hand, the role of international stock market influences housing prices in Chile. Also, the Chilean Central Bank has a significant causality relationship with the housing prices. The structure of the article is organised with a second section devoted to explaining the methods and data used for the test, followed by the results analysed and discussed in the third section and closing conclusions that allow for further research and policy implications of the findings. These findings are valuable to complexify the Chilean housing policy by incorporating financial variables.

Financialisation of Housing in London: Empirical Evidence on Housing Prices

“…Further scope for future research could be based on results that incorporate other fundamentals of house price formation to see which factors are the most relevant in influencing price. In an article published in the case of Santiago de Chile [37,38], it can be seen that financial factors are statistically significant and more relevant than other house price fundamentals for that city. This is indicative that the research agenda on the econometrics of housing financialisation is broad and compelling.…”

“…In other words, the test allows us to see whether house prices are causing the increase in sales or vice versa, or whether both causal relationships are occurring at the same time. The Granger causality test is constructed from a set of bivariate regressions at various relational moments between the variables, according to the number of lags that the study contains [37], from the following general formula combining x with y:…”