Does increased construction activity transmit into housing prices and rents? Evidence from the V4 countries and Austria

Abstract

This study focuses on the housing market in Central European countries. We analyze the housing prices and their sensitiveness to selected variables, especially regarding construction activity in the V4 countries and Austria. By employing a specification of a recursive VAR model for each country, we show that the most responsive to changes in construction activity is housing market in Austria. Meanwhile housing prices in the V4 countries do not exhibit any strong association with construction activity, perhaps due to under-supply of housing in the countries. The paper provides discussion on the variables dependencies explanations.