Abstract

ESCOBAR-ESPINOLA, Fernando Aníbal  and  BAEZ-MARTINEZ, José F.. Real estate bubbles: a preventive model for Asunción’s real estate market. Period 1995-2015. Poblac.Desarro. [online]. 2021, vol.27, n.52, pp.43-57. ISSN 2076-054X.  https://doi.org/10.18004/pdfce/2076-054x/2021.027.52.043.

This research seeks to answer the main question on whether there was a real estate bubble in the city of Asunción during the years from 1995 to 2015. In addition to the analysis of the evolution of the real estate market price, the fundamentals of the real estate market by the demand and supply sides are also identified and examined. In the absence of a price index for the real estate market of Asunción, alternative indices are used according to the literature (such as the rental index), and an alternative price index is estimated from econometric models for latent variables. By means of these indices and the use of key variables of the theoretical determination of the long-term equilibrium in the real estate market, results of cointegration tests suggest the absence of a real estate bubble in Asunción during the considered period. Moreover, a structural autoregressive vector model allows to verify that real estate price variations in Asunción were mainly explained by demand factors, such as the real cost of using a house and the real cost of mortgage credit (real mortgage interest rate) and to a lesser extent, due to supply-side factors such as the cost of land.

Keywords : bubble; real estate; market; warning..

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