Home

>

Understanding the behaviour of house prices and household income per capita in South Africa: Application of the asymmetric autoregressive distributed lag model

29 March 2021
Publication Type: Working Paper
JEL Code: C1, C33, E13, E2, E44, O11, O16, R3

Homeownership by the lower and middle-income households is crucial to create wealth, particularly for South Africa with high levels of economic and wealth inequality. However, scholarship has paid little attention to how income affects the affordable housing market segment despite its systemic importance to the South African economy. This study employs the asymmetric autoregressive distributed lag model to study the effect of household income per capita on the affordable house prices in South Africa using quarterly data from 1985 to 2016. The results revealed the presence of an asymmetric long-run relationship between affordable house prices and household income per capita. The estimated asymmetric long-run coefficients of logIncome[+] and longIncome[-] are 1.080 and -4.354 respectively implying that a 1% increase/decrease in household income per capita induces a 1.08% rise/4.35% decline in affordable house prices everything being equal. We argue that given the 71.4% market share of affordable housing in all residential properties in South Africa, a persistent fall in household income can trigger a systemic crisis, particularly with mortgage securitization. Thus, policymakers should closely monitor the practice of mortgage securitization, particularly in the affordable market segment to avoid systemic risk to the economy.

Working paper 856
1 March 2021
RELATED JOURNAL:

International Journal of Housing Markets and Analysis
5 August 2021
SHARE THIS Working Paper PUBLICATION:

Related South Africa’s Cities and Growth Spatial Challenges and Policy Interventions Content

Request for Proposals: The role of cities as drivers of growth and employment
Background Urbanization in South Africa is expected to reach 80% by...
Published: 27 July 2023
Call for Work
South Africa’s future will be decided in our cities
Discussion Document 14 South Africa’s cities face multiple, overlap...
Published: 23 June 2023
Discussion Document
Monitoring South Africa’s metropolitan economies: A survey of the data landscape
Discussion Document 13 Disparities in data across different metropo...
Published: 22 May 2023
Discussion Document
Cities, productivity and Jobs in SA: Problems and potential
Discussion Document 12 Cities contribute to national prosperity bec...
Published: 22 May 2023
Discussion Document
Place-based economic policies: international lessons for South Africa
Discussion Document 11 Place-based policies are designed to support...
Published: 22 May 2023
Discussion Document
What luminosity data can and cannot reveal about South Africa’s urban economies
Discussion Document 10 As novel types of data are becoming availabl...
Published: 22 May 2023
Discussion Document
Crime: A policy-oriented survey
Discussion Document 9 South Africa has a reputation for having high...
Published: 22 May 2023
Discussion Document
Virtual CDE Workshop on SA Cities and Growth
Urban economics has provided powerful insights into how the charact...
Published: 12 December 2022
Workshop

Search Resources

Ground Floor Brookside Building
11 Imam Haron Road
Claremont, 7700
Cape Town

PostNet Suite # 109
Private Bag X1005
Claremont 7735
Cape Town

Get Social