Volatility in the residential housing market: an international perspective

Abstract

There is a substantial literature on property‐market cycles, but not on the related, though distinct, issue of volatility. Focuses on the nature, causes and effects of volatility in the residential property market. Begins with a look at the negative impact of volatility, followed by a brief historical perspective. In an analysis of the mechanics of the property market, considers supply and demand in terms of their specific characteristics in this market context. Then analyses the psychology of the property market, with an emphasis on mass psychology. Further issues are the role of banks in exacerbating the existing market volatility, speculation, population influxes as a source of instability and, finally, counter‐cyclical policy which may achieve the opposite of what is intended. Takes a deliberately international perspective.