The impact of macroeconomic factors on real estate prices

Abstract

The real estate market, as one of the most volatile economic sectors, is a key research topic for many authors. Regardless the significance of this topic, no previous research has been conducted to evaluate the factors which influence the price of real estate in Montenegro. Therefore, the objective of this study is to clarify whether the trend in real estate prices in Montenegro can be explained by macroeconomic fundamentals such as GDP, the inflation rate, interest rates on mortgages, take-up of mortgages, the unemployment rate, the average net salary, the current account deficit and constructing activity and to determine which of them is the most important in explaining the price trend for this market. The applied methodology is based on the model averaging technique, which has not been used in previous research on this topic; it enables the research to focus on the relevant results despite the short time series and the large number of independent variables. The results obtained point to the fact that price trends in real estate are best described by and most closely align to GDP. Apart from GDP, net salary, the unemployment rate as well as the take-up of mortgages and their interest rates are shown to be significant as variables, which determine price trends within the real estate market.

Comparative analysis of different approaches to the Ukrainian residential property market evolution modelling and its forecast for the years 2019–2024

“…The existing literature on the residential property market has explored various aspects of its evolution and the factors influencing it. Several studies have used historical analysis to understand market trends, using data sources such as property prices, transaction volumes and market indicators (Radonjić et al , 2019).…”

“…Several studies have explored the impact of macroeconomic factors on real estate prices in various regions: Stanković (2022) in Bosnia and Herzegovina: the study analysed 12 key macroeconomic factors and their impact on real estate prices. Factors such as household final consumption expenditure, GDP per capita and nominal GDP were found to have a significant influence on real estate prices. Alkali et al (2019) in Nigeria: used ARIMA and ARIMAX models to analyze the impact of macroeconomic variables on forecasting models. Radonjić et al (2019) in Montenegro: used model averaging to study the relationship between factors like GDP, unemployment and interest rates with prices to address the challenge of a short time series and many independent variables. …”

“…Radonjić et al (2019) in Montenegro: used model averaging to study the relationship between factors like GDP, unemployment and interest rates with prices to address the challenge of a short time series and many independent variables.…”

The Impact of Selected Macroeconomic Variables on House Prices in Croatia

“…His results confirmed the statistically significant positive influence of national income, interest rates and stock prices on house prices in analyzed countries. Radonjić et al (2019) using the model averaging technique for data from Montenegro for the period from 2011 to 2017, identify the following macroeconomic variables that have a significant impact on house prices: GDP, the mortgage interest rate, availability of mortgages, the unemployment rate and the average net salary.…”