Journal
INTERNATIONAL JOURNAL OF STRATEGIC PROPERTY MANAGEMENT
Volume 17, Issue 2, Pages 188-198Publisher
VILNIUS GEDIMINAS TECH UNIV
DOI: 10.3846/1648715X.2013.807400
Keywords
House prices; Inflation; South Africa
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This paper investigates whether house prices provide a suitable hedge against inflation in South Africa by analysing the long-run relationship between house prices and the prices of non-housing goods and services. Quarterly data series are collected for the luxury, large middle-segment, medium middle-segment, small middle-segment and the entire middle segment of house prices, as well as, the consumer price index excluding housing costs for the period 1970:Q1-2011:Q1. Based on autoregressive distributed lag (ARDL) models, the empirical results indicate long-run cointegration between the house prices of all the segments and the consumer price index excluding housing costs. Moreover, the long-run elasticity of house prices with respect to prices of non-housing goods and services, i.e., the Fisher coefficient is greater than one for the luxury segment, virtually equal to one for the small middle-segment, and less than one for the large and medium middle-segments, as well as the affordable segments. More importantly though, the estimated Fisher coefficients are not statistically different from unity - a result consistent with the proposed theoretical framework relating housing prices and consumer prices excluding housing expenditure. In general, we infer that house prices in South Africa provide a stable inflation hedge in the long-run.
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