Clustering and regional growth in the housing market: Evidence from Indonesia

Ariyanto Adhi Nugroho, Muhammad Yusuf Indra Purnama, Laela Rizki Fauzia

Abstract


The housing market is one of the monetary policy instruments in macro-prudential terms. The overall policy adopted through the Loan-to-Value ratio does not accommodate different regional characteristics. Location and area characteristics are important factors that influence the development of housing property prices. This study uses panel data regression analysis, with objects of 15 cities in Indonesia during 2007-2017. The results of the analysis provide a proof that the building rent, population density, construction costs, Gross Regional Domestic Product, unemployment rate, and minimum income, affect housing prices differently in each growth category, while the LTV ratio and inflation do not have a significant effect onto house prices. The regional economic growth is used to form regional clustering based on the speed of house price growth so that monetary policy in the housing sector achieves the target.

JEL Classification: E52, O18, R58

DOIhttps://doi.org/10.26905/jkdp.v24i1.3565


Keywords


Clustering; Housing prices; Regional growth

References


Arrondel, L., & Lefebvre, B. (2001). Consumption and investment motives in housing wealth accumulation: A French study. Journal of Urban Economics, 50(1), 112–137. https://doi.org/10.1006/juec.2000.2209

Bian, X., Lin, Z., & Liu, Y. (2018). House price, loan-to-value ratio and credit risk. Journal of Banking and Finance, 92, 1–12. https://doi.org/10.1016/j.jbankfin.2018.04.006

Chakraborty, I., Goldstein, I., & MacKinlay, A. (2019). Monetary stimulus and bank lending. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.2734910

Collins, A. J., Harrison, D. M., & Seiler, M. J. (2015). Mortgage modification and the decision to strategically default: A game theoretic approach. Journal of Real Estate Research, 37(3), 439–470. https://doi.org/10.2139/ssrn.2194258

Del Negro, M., & Otrok, C. (2007). 99 Luftballons: Monetary policy and the house price boom across U.S. states. Journal of Monetary Economics, 54(7), 1962–1985. https://doi.org/10.1016/j.jmoneco.2006.11.003

Dong, R., Gan, C., Hu, B., & Cohen, D. A. (2013). An empirical analysis of housing price bubble: A case study of Beijing housing market. Research in Applied Economics, 5(1), 77-97. https://doi.org/10.5296/rae.v5i1.3433

Fontenla, M., & Gonzalez, F. (2009). Housing demand in Mexico. Journal of Housing Economics, 18(1), 1–12. https://doi.org/10.1016/j.jhe.2008.08.001

Fuss, R., Zhu, B., & Zietz, J. (2012). Why Do Local Housing Prices React so Differently to A Monetary Stimulus? Technical Report. University of St. Gallen.

Gelain, P., & Lansing, K. J. (2014). House price, expectation, and time varying fundamentals. Journal of Empirical Finance, 29, 3-25. https://doi.org/10.1016/j.jempfin.2014.05.002

Glaeser, E. L., Gyourko, J., Morales, E., & Nathanson, C. G. (2014). Housing dynamics: An urban approach. Journal of Urban Economics, 81, 45–56. https://doi.org/10.1016/j.jue.2014.02.003

Gujarati, Damodar N. dan Dawn C. Porter. (2009). Basic Econometrics. Fifth Edition. New York: McGraw-Hill.

Hernández-Murillo, R., Owyang, M. T., & Rubio, M. (2017). Clustered housing cycles. Regional Science and Urban Economics, 66, 185–197. https://doi.org/10.1016/j.regsciurbeco.2017.06.003

Hsu, B. J. W., Matsa, D. A., & Melzer, B. T. (2018). Unemployment insurance as a housing market stabilizer, 108(1), 49–81. https://doi.org/10.1257/aer.20140989

Ioannides, Y. M., & Zabel, J. E. (2003). Neighbourhood effects and housing demand. Journal of Applied Econometrics, 18(5), 563–584. https://doi.org/10.1002/jae.740

Knoll, B. K., Schularick, M., & Steger, T. (2017). No price like home: Global house prices, 1870–2012. American Economic Review, 107(2), 331–353. https://doi.org/10.1257/aer.20150501

Kurniawan, I. (2017). Property price bubble: Regional analysis in Indonesia. Journal of Developing Economies, 2(1), 1-11. https://doi.org/10.20473/jde.v2i1.5707

Leamer, E. E., & Anderson, J. E. (2007). Housing is the business cycle. Working Paper 13428. National Bureau of Economic Research.

Loutskina, E., & Strahan, P. E. (2015). Financial integration, housing, and economic volatility. Journal of Financial Economics, 115(1), 25–41. https://doi.org/10.1016/j.jfineco.2014.09.009

Mankiw, N. G. (2003). Teori Makroekonomi. Edisi Kelima. Jakarta: Penerbit Erlangga.

Nugroho, A. A., Purnama, M. Y. I., & Fauzia, L. R. (2018). Monetary policy and the housing market in Indonesia : Evidence from selected regions. Jurnal Keuangan dan Perbankan, 22(4), 747–759. https://doi.org/10.26905/jkdp.v22i4.2515

O’Sullivan, A. (2012). Urban Economics. 8th Edition. Douglas Reiner.

Pavlov, A., & Wachter, S. (2011). Subprime lending and real estate prices. Real Estate Economics, 39(1), 1–17. https://doi.org/10.1111/j.1540-6229.2010.00284.x

Seiler, M. J. (2018). Asymmetric dominance and its impact on mortgage default deficiency collection efforts. Real Estate Economics, 46(4), 971–990.

https://doi.org/10.1111/1540-6229.12176

Tuzel, S., & Zhang, M. Ben. (2017). Local risk, local factors, and asset prices. Journal of Finance, 72(1), 325–370. https://doi.org/10.1111/jofi.12465


Full Text: PDF

Refbacks

  • There are currently no refbacks.




rsz_8th_ifma rsz_6th_perbanas_conference rsz_the_6th_indonesian_finance_association_international_conference


Journal of Finance and Banking

Diploma Program of Banking and Finance
Faculty of Economics and Business University of Merdeka Malang

Mailing Address:

2nd-floor Banking and  Finance Building, Terusan Raya Dieng Street No.57 Malang, 65146, East Java, Indonesia
Phone/WhatsApp: +628123321664; Fax. +62 341 580511
Email:
jkpunmermlg@yahoo.com


Creative Commons License
This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.