Housing market cycles – a disequilibrium model and its calibration to the Warsaw housing market

Krzysztof Olszewski, Hanna Augustyniak, Jacek Łaszek, Joanna Waszczuk


This paper presents a simple disequilibrium model in the housing market, calibrated to the Warsaw market. We discuss the last cycle and show how a combination of slight demand shocks with short-term rigid supply leads to strong fluctuations. The cyclical character is a permanent feature of the property market and can be explained by the inelasticity of supply. Market participants form price and demand expectations based on past observations. This causes frequent cycles that, under specific conditions, can lead to economic crises. We believe that the model describes the reality of the real estate market better than equilibrium models do, so it can be useful for central banks and financial supervision institutions in the analysis of the impact of fiscal and monetary policy and regulations on the real estate market.


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DOI: http://dx.doi.org/10.17451/eko/35/2013/33


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