Authors

• Luis A. Gil-Alana (alana@unav.es)
  School of Economics and Business Administration, University of Navarra
• Goodness C. Aye (goodness.aye@up.ac.za)
  Department of Economics, University of Pretoria
• Rangan Gupta (rangan.gupta@up.ac.za)
  Department of Economics, University of Pretoria

Abstract
This study examines the time series behaviour of South African house prices within a fractional integration modelling framework while identifying potential breaks and outliers. We used quarterly data on the six house price indexes, namely affordable, luxury, middle-segment (all sizes, large, medium and small sizes), covering the periods 1966:Q1-2012:Q1 for the different middle-segments, 1966:Q3-2012:Q1 for the luxury segment and 1969:Q4-2012:Q1 for the affordable segment. In general, there is persistence in South African house prices with breaks identified. Our results show that in the cases of affordable and luxury, shocks will be transitory, disappearing in the long run, while for the remaining four series of the middle-segment, shocks will be permanent. Hence, for the middle-segment series strong policy measures must be adopted in the event of negative shocks, in order to recover the original trends.

Classification JEL:C16, R21

Keywords:House prices, persistence, breaks, fractional integration, South Africa

Number of Pages:28

Creation Date:2012-12-06

Number:null/12