A Panel Analysis of Polish Regional Cities Residential Price Convergence in the Primary Market

Matysiak, George and Olszewski, Krzysztof (2019): A Panel Analysis of Polish Regional Cities Residential Price Convergence in the Primary Market.

Abstract

We employ two methodologies in order to identify groupings of cities and to analyse the factors which drive convergence in residential prices across Polish prime markets over the period 2007-2018. The Phillips and Sul (2007) methodology is used to identify convergence in primary residential prices in the major Polish cities. The results indicate that residential prices do not converge to a single common trend. However, we find the existence of three distinct sub-groups of cities (‘clubs’) where residential prices converge to their own steady-state paths. Using an ordered logit model, we investigate supply and demand factors determining club membership, which subsequently allocates 13 out of the 15 cities as belonging to the clubs identified by the Phillips and Sul procedure.

• Item Type: MPRA Paper
• Language: English
• Keywords: Polish residential prices, Phillips and Sul, panel convergence, relative transition, ordered logit model.
• Subjects: R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R1 - General Regional Economics; R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R1 - General Regional Economics > R15 - Econometric and Input-Output Models ; Other Models; R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R3 - Real Estate Markets, Spatial Production Analysis, and Firm Location; R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R3 - Real Estate Markets, Spatial Production Analysis, and Firm Location > R31 - Housing Supply and Markets; R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R3 - Real Estate Markets, Spatial Production Analysis, and Firm Location > R32 - Other Spatial Production and Pricing Analysis

References

Agresti, A. (2015) Categorical Data Analysis, Third Edition, John Wiley & Sons, Inc.

Agresti, A. and Tarantola, C. (2018) Simple ways to interpret effects in modelling ordinal categorical data, Statistica Neelandica, pp 1-14. https://doi.org/10.1111/stan.12130.

Antonakakis, N., Christou, C., Cunado, J. and Gupta, R. (2017) Convergence Patterns in Soverign Bond Yields Spreads: Evidence from the Euro Area, Journal of International Financial Markets, Institutions & Money, pp 1-30. doi:http//dx.doi.org/10.1016/j.intfin.2017.03.002.

Apergis, T., Christou, C. and Payne, J. (2011) Political and Institutional Factors in the Convergence of International Equity Markets: Evidence from the Club Convergence and Clustering Procedure, Atlantic Economic Journal, 39(1), pp 7-18.

Apergis, N. and Gabrielsen, A. (2012) Testing for Convergence in the European Insurance Sector: A Non-Linear Factor Approach, Asian Journal of Finance & Accounting, 4(2), pp 1-17.

Apergis, N. and Payne, J. (2012) Convergence in U.S. house prices by state: evidence from the club convergence and clustering procedure, Letters in Spatial and Resource Sciences, 5(2), pp 103-111.

Apergis, N., Christou, C. and Miller, S.M. (2014) Country and industry convergence of equity markets: International evidence from club convergence and clustering, North American Journal of Economics and Finance, 29, pp 36-58.

Augustyniak, H., Łaszek, J., Olszewski, K., and Waszczuk, J. (2014) Modelling of cycles in the residential real estate market, Kwartalnik Nauk o Przedsiębiorstwie, 2, pp 63-77.

Baldowska, G., Leszczynski, R. and Myszkowska, B. (2014) Convergence and differentiation processes in local markets and structural changes (comparison of 16 markets in Poland), National Bank of Poland Working Paper No. 174, Economic Institute, Warsaw.

Bartkowska, M. and Riedl, A. (2012) Regional convergence clubs in Europe: identification and conditioning factors, Economic Modelling, 29(1), pp 22–31. Barro, R.J. (1991) Economic Growth in a Cross Section of Countries, Quarterly Journal of Economics, 106(2), pp 407-443.

Barro, R.J. and Sala-i-Martin, X. (1992) Convergence, Journal of Political Economics, 100(2), pp 223-251.

Baumol, W.J. (1986) Productivity Growth, Convergence, and Welfare: What is the Long-Run Data Show, American Economic Review, 76(5), pp 1071-1085.

Blanco, F., Martin. V., and Vazquez, G. (2016) Regional House price convergence in Spain during the housing boom, Urban Studies, 53(4), pp 775-798.

Borsi, M. T. and Metiu, N. (2015) The Evolution of Economic Convergence in the European Union, Empirical Economics, 48(2), pp 657–681.

Brant, R. (1990) Assessing Proportionality in the Proportional Odds Model for Ordinal Logistic Regression, Biometrics, 46(4), pp 1171-1178.

Ciarlone, A. (2015) House price cycles in emerging economies, Studies in Economics and Finance, 32(1), pp 17–52.

Cook, S. (2003) The convergence of regional house prices in the UK, Urban studies, 40(11), pp 2285-2294.

Cook, S. (2012) β-convergence and the cyclical dynamics of UK regional house prices, Urban Studies, 49(1), pp203-2018.

Communities and Local Government. (2010), Housing and Regional Economic Disparities: economics paper 5, DCLG economics papers.

CSO (2019) Local Data Bank, Central Statistical Office of Poland. https://bdl.stat.gov.pl/BDL/start.

Dittmann, I. (2014) Gamma konwergencja cen na lokalnych rynkach mieszkaniowych w Polsce, Studia Ekonomiczne, Zeszyty Naukowe Uniwersytetu Ekonomicznego w Katowicach, 181, pp 195-207.

Du, K.R. (2017) Econometric convergence test and club clustering using Stata, Stata Journal, 17(4), pp 882-900.

Eurostat (2018) Living conditions in Europe, Chapter 3 Housing quality, European Union, 2018.

Fritche, U. and Kuzin, V. (2011) Analysing convergence in Europe using the non-linear single factor model, Empirical Economics, 41(2), pp 343-369.

Fullerton, A.S. and Xu, J. (2016) Ordered Regression Models Parallel, Partial, and Non-Parallel Alternatives, CRC Press, Taylor & Francis Group, LLC.

Galor, O. (1996) Convergence? Inferences from theoretical models, Economic Journal, 106(437), pp 1056–1069.

Gnat, S. (2014) Konwergencja cenowa na lokalnych rynkach nieruchomości w aglomeracji szczecińskiej w latach 2008-2013, Studia i Prace WNEIZ US, 36(1), pp 213-225.

Greene, W.H. (2012) Econometric Analysis, Seventh Edition, Pearson Education Limited, Harlow, England.

Hodrick, R.J. and Prescott, E.C. (1997) Postwar U.S. business cycles: an empirical investigation, Journal of Money, Credit and Banking, 29(1), pp 1-16.

Hodrick R.J and Prescott, E.C. (1980) Postwar U.S. business cycles: An empirical investigation. Discussion Paper No. 451, Carnegie-Mellon University.

Holmes, J.M., Otero, J. and Panagiotidis, T. (2019) Property heterogeneity and convergence club formation among local house prices, Journal of Housing Economics, 43, pp 1-13. doi:https://doi.org/10.1016/j.jhe.2018.09.02.

Kim, Y. S. and Rous, J.J. (2012) House price convergence: Evidence from US state and metropolitan area panels, Journal of Housing Economies 21, 159-186. Łaszek, J., Augustyniak, H., and Olszewski, K. (2016a) FX mortgages, housing boom and financial stability–a case study for Poland (2005-2015), The Narodowy Bank Polski Workshop: Recent Trends in the Real Estate Market and its Analysis, 2015 Edition.

Łaszek, J., Olszewski, K., and Waszczuk, J. (2016b) Monopolistic Competition and Price Discrimination as a Development Company Strategy in the Primary Housing Market, Critical Housing Analysis, 3(2), pp 1-12.

Łaszek, J., Olszewski, K., and Waszczuk, J. (2017) Regional Diversification of Saturation of the Housing Stock: Poland against the Background of Europe, Barometr Regionalny, Analizy i Prognozy, 15(2), pp 7-17.

Leszczynski, R. and Olszewski, K. (2017) An analysis of the primary and secondary housing market in Poland: evidence from the 17 largest cities, Baltic Journal of Economics, 17(2), pp 136-151. Lyncker, K. and Thoennessen, R. (2017) Regional club convergence in the EU: evidence from a panel data analysis, Empirical Economics, 52(2), pp 525-533.

Mankiw, N.G., Romer, R. and Weil, D.W. (1992) A Contribution to the Empirics of Economic Growth, Quarterly Journal of Economics, 107(2), pp 407-437. Meen, G. (1999) Regional house price prices and ripple effect: a new interpretation, Housing Studies, 14(6), pp 733-753.

Meen, G. (2005) On the economics of the Barker Review of Housing Supply, Housing Studies, 20(6), pp 949-947.

Montagnoli, A. and Nagayasu, J. (2015) UK house price convergence clubs and spillovers. Journal of Housing Economics, 30(C), pp 50-58.

Montfort, M., Cuestas, K.C. and Ordonez, J. (2013) Real convergence in Europe: A cluster analysis, Economic Modelling, 33(C), pp 689-694.

Montanes, A. and Olmos, L. (2013) Convergence in US house prices, Economics Letters, 121(2), pp 152-155. NBP (2019) Information on home prices and the situation in the housing and commercial real estate market in Poland in 2018 Q4, Narodowy Bank Polski. Nissan, E and Payne, J.E. (2013) A Simple Test of σ-convergence in U.S. Housing Prices across BEA Regions, Journal of Regional Analysis & Policy, 43(2), pp 178-185.

Phillips, P.C. and Sul, D. (2007) Transition modelling and econometric convergence tests, Econometrica, 75(6), pp 1771–1855.

Phillips, P.C. and Sul, D. (2009) Economic transition and growth, Journal of Applied Econometrics 24(7), pp 1153–1185.

Ravn, M.O and Uhlig, H. (2002) On adjusting the Hodrick -Prescot filter for frequency of observations, Review of Economics and Statistics, 84(2), pp 371-376.

Rughoo, A. and You, K. (2015) Asian Financial Integration: Global or Regional? Evidence from Money and Bond Markets, International Review of Financial Analysis, 48(C), pp 419-434.

Solow, R.M. (1956) A contribution to the theory of economic growth, Quarterly Journal of Economics, 70(1), pp 65-94.

Wood, G., Sommervoll, D.E. and de Silva, A. (2015) Do Urban House Prices Converge? Urban Policy and Research, 34(2), pp 102-115. Yunus, N. and Swanson, P.E. (2013) A closer look at the U.S. housing market: modelling relationships among regions, Real Estate Economics, 41(3), pp 542–568.

Zhang, W., Xu, W. and Wang, X. (2019) Regional convergence clubs in China: identification and conditioning factors, The Annals of Regional Science, 62(2), pp 327-350.