1. ¹Oesterreichische Nationalbank, Austria
2. ²EconomiX at the University of Paris X-Nanterre, Paris
3. ³William Davidson Institute at the University of Michigan Ann Arbor, MI, USA. E-mails: balazs.egert@oenb.at, begert@u-paris10.fr
4. ⁴Bank for International Settlements, Centralbahnplatz 2, Basel 4002, Switzerland. E-mail: dubravko.mihaljek@bis.org

Abstract

This paper studies the determinants of house prices in eight transition economies of central and eastern Europe (CEE) and 19 OECD countries. The main question addressed is whether the conventional fundamental determinants of house prices, such as GDP per capita, real interest rates, housing credit and demographic factors, have driven the observed house prices in CEE. We show that house prices in CEE can be explained well by the underlying conventional fundamentals and some transition specific factors, in particular institutional development of housing markets and housing finance and quality effects.