Share:


The long-run relationship between house prices and inflation in South Africa: an ARDL approach

    Roula Inglesi-Lotz Affiliation
    ; Rangan Gupta Affiliation

Abstract

This paper investigates whether house prices provide a suitable hedge against inflation in South Africa by analysing the long-run relationship between house prices and the prices of non-housing goods and services. Quarterly data series are collected for the luxury, large middle-segment, medium middle-segment, small middle-segment and the entire middle segment of house prices, as well as, the consumer price index excluding housing costs for the period 1970:Q1–2011:Q1. Based on autoregressive distributed lag (ARDL) models, the empirical results indicate long-run cointegration between the house prices of all the segments and the consumer price index excluding housing costs. Moreover, the long-run elasticity of house prices with respect to prices of non-housing goods and services, i.e., the Fisher coefficient is greater than one for the luxury segment, virtually equal to one for the small middle-segment, and less than one for the large and medium middle-segments, as well as the affordable segments. More importantly though, the estimated Fisher coefficients are not statistically different from unity – a result consistent with the proposed theoretical framework relating housing prices and consumer prices excluding housing expenditure. In general, we infer that house prices in South Africa provide a stable inflation hedge in the long-run.

Keyword : House prices, Inflation, South Africa

How to Cite
Inglesi-Lotz, R., & Gupta, R. (2013). The long-run relationship between house prices and inflation in South Africa: an ARDL approach. International Journal of Strategic Property Management, 17(2), 188-198. https://doi.org/10.3846/1648715X.2013.807400
Published in Issue
Jun 27, 2013
Abstract Views
74
PDF Downloads
74