Amsterdam house price ripple effects in The Netherlands

Amsterdam house price ripple effects in The Netherlands

Teye, A.L. (TU Delft OLD Housing Systems)
Knoppel, Michel (Universiteit van Amsterdam)
de Haan, J. (TU Delft OLD Housing Systems; Statistics Netherlands (CBS))
Elsinga, M.G. (TU Delft OLD Housing Systems)

2017

Purpose: This paper aims to examine the existence of the ripple effect from Amsterdam to the housing markets of other regions in The Netherlands. It identifies which regional housing markets are influenced by house price movements in Amsterdam. Design/methodology/approach: The paper considers the ripple effect as a lead-lag effect and a long-run convergence between the Amsterdam and regional house prices. Using the real house prices for second-hand owner-occupied dwellings from 1995q1 to 2016q2, the paper adopts the Toda–Yamamoto Granger Causality approach to study the lead-lag effects. It uses the autoregressive distributed lags (ARDL)-Bounds cointegration techniques to examine the long-run convergence between the regional and the Amsterdam house prices. The paper controls for house price fundamentals to eliminate possible confounding effects of common shocks. Findings: The cumulative evidence suggests that Amsterdam house prices have influence on (or ripple to) all the Dutch regions, except one. In particular, the Granger Causality test concludes that a lead-lag effect of house prices exists from Amsterdam to all the regions, apart from Zeeland. The cointegration test shows evidence of a long-convergence between Amsterdam house prices and six regions: Friesland, Groningen, Limburg, Overijssel, Utrecht and Zuid-Holland. Research limitations/implications: The paper adopts an econometric approach to examine the Amsterdam ripple effect. More sophisticated economic models that consider the asymmetric properties of house prices and the patterns of interregional socio-economic activities into the modelling approach are recommended for further investigation. Originality/value: This paper focuses on The Netherlands for which the ripple effect has not yet been researched to the authors’ knowledge. Given the substantial wealth effects associated with house price changes that may shape economic activity through consumption, evidence for ripples may be helpful to policy makers for uncovering trends that have implications for the entire economy. Moreover, the analysis controls for common house price fundamentals which most previous papers ignored.

Amsterdam
House prices
Lead-lag effect
Ripple effect
Spatial causality

http://resolver.tudelft.nl/uuid:bbd0f920-e6b7-4102-9686-aefbfb8268ff

https://doi.org/10.1108/JERER-11-2016-0041

1753-9269

Journal of European Real Estate Research, 10 (3), 331-345

Institutional Repository

journal article

© 2017 A.L. Teye, Michel Knoppel, J. de Haan, M.G. Elsinga