Do birds of the same feather flock together? The cultural geography of global housing price interaction

ABSTRACT

The literature documents that cultural factors affect housing or real estate markets and their interactions. Given this, we map global housing markets into different cultural blocs, and study the dynamics of price interaction among them. We investigate the extent and manner of price interaction within and between cultural blocs using a battery of econometric tests and network analyses. We confirm that housing markets within the same blocs are highly correlated, cointegrated and react to each other more quickly than those among different blocs. Our results provide a new perspective on the important role of culture in the transmission of linkages among housing markets globally and have vital implications for the global coordination of policies to stabilize housing markets.

KEYWORDS:

• International Housing Market
• Culture Dimensions
• GARCH
• Correlation Network

JEL CLASSIFICATION:

• R21
• R30
• C22
• C45
• C58

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

¹ Although important, the analysis of global commercial real estate is beyond the scope of this study.

² The details regarding the Global Leadership and Organizational Behaviour Effectiveness (GLOBE) methodology to estimate the country clusters or groups sharing similar cultural characteristics are available at https://globeproject.com/results?page_id=country#country.

³ Source: https://www.bfs.admin.ch/bfs/en/home/statistics/population/languages-religions/languages.html.

⁴ Source: https://www.cmhc-schl.gc.ca/en/buying/mortgage-loan-insurance-for-consumers/what-is-mortgage-loan-insurance.

⁵ Because of space constraint, we do not include tables showing pair-wise correlation estimates.

⁶ Please note that we do not include the unit tests due to space limitation. Results are available on request from the authors.