Regional Determinants of Housing Prices in the Czech Republic

This paper examines the behaviour of housing prices and identifies their determinants across Czech regions from 2000 to 2019. The effect of a wide range of variables on apartment prices is analysed on quarterly data for all regions of the Czech Republic using panel dynamic OLS estimator. Furthermore, an error correction model is employed to verify the existence of long-term equilibrium of apartment prices and quantify the speed of price adjustment in the short run. In order to check the robustness of the joint model, several regions with unique characteristics are excluded from the sample and analysed separately. Our results suggest that apartment prices are driven mainly by wages, unemployment rate and migration. We also found a large positive effect of building plot prices in high-income regions, while labour force factors (wages and age structure) seem to be more critical in low-income regions. The results of the joint error correction model suggest that shocks out of equilibrium are absorbed after approximately two years.