## Don't Look Up: House Prices in Emerging Europe

_IMF Working Papers, December 2, 2022_

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## Bibliographic details
- Authors: Serhan Cevik, Sadhna Naik
- Published: December 2, 2022
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9798400227042.001

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### Scope and methodology
- Investigates how housing prices respond to economic, financial and demographic conditions in emerging markets in Europe.
- Uses quarterly data covering 10 countries over the period 1998–2022.
- Implements a panel quantile regression approach to obtain a granular analysis of real estate markets.

### Key findings
- Economic, financial and demographic factors explain the changes in real house prices in emerging Europe.
- Income growth has the most significant impact on real house prices.
- Quantile regression estimations show that income growth matters more for higher housing prices than those at the lower quantiles of the property market.
- An increase in short-term or long-term interest rates has a price-dampening impact, indicating that a higher cost of borrowing is associated with lower real house prices.
- These results indicate that the downturn in house prices could deepen with the looming economic recession and soaring interest rates.

### Policy-relevant implications
- Monitoring income dynamics is critical for assessing pressures in higher segments of the housing market.
- Interest-rate developments (both short-term and long-term) are key levers affecting house-price dynamics; rising rates are likely to exert downward pressure on real house prices.
- Anticipated economic recession and rising borrowing costs could amplify the housing-market downturn, suggesting a need for policy preparedness to cushion potential negative spillovers to financial stability and household balance sheets.

*Serhan Cevik and Sadhna Naik, "Don't Look Up: House Prices in Emerging Europe", IMF Working Papers 2022, 236 (December 2, 2022).*

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_Source: https://www.imf.org/en/publications/wp/issues/2022/12/02/don-t-look-up-house-prices-in-emerging-europe-526281_