Description

This paper econometrically examines the factors determining the real estate price dynamics in Chile in the period 1990-2007. For such purpose, we use annual data of 419 homes located in the Metropolitan Area and acquired in that period. The results indicate that variables such as age and size are statistically significant determinants in the formation of property prices; access to the subway stations tends to capitalize in a non-linear manner; and both household income and aggregate income are statistically and economically significant. The price decomposition reveals that between 69% and 71% of the housing price level is explained by determinants related to attributes of the property, while about 70% of the observed growth in housing prices between 1990 and 2007 is the result of macro-financial determinants. During 2006 and 2007, the trend in prices is not significantly different from that predicted by the model. These results tend to be similar using alternative estimates by housing type and different sample sub-periods.