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Results
The formal regression results are presented in Table 15. In the
baseline regression with no fixed time effect, as shown in Column (1), the
coefficients associated with GDP growth and inflation rate are positive and
statistically significant, whereas that for interest rate (which captures bor-
rowing costs) is mildly positive but statistically insignificant, as is the impact
of homeownership rate on home prices.
After fixed time effect is controlled for, as shown in Column (2), all
coefficients attached to real economic variables are consistent with eco-
nomic intuitions and are noticeably greater in magnitude when compared
with Column (1), i.e. economic growth and inflation is positively related to
home prices, while the opposite is true for nominal interest rate. In this
model, homeownership rate again appears to have a positive impact on
home prices, albeit statistically insignificant.
To explore further the nexus between homeownership rate and
home prices, we presented a third regression result in Column (3) with a
squared term of homeownership rate added. Interestingly, the coefficient
associated with homeownership rate is still positive but becomes greater
in value and even marginally statistically significant, whereas the relation-
ship between home prices and real economic variables is preserved.
In conclusion, our empirical analysis shows that an increase in
homeownership rate will not necessarily elicit a reduction of home prices.
Table 14: Proxy for nominal interest rates
Source: CEIC.
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