Determinants of house price dynamics. What can we learn from search engine data?

There is a broad literature about fundamental determinants of house prices, which received increasing attention in the aftermath of the subprime crisis. However, there might be several other partly unobservable socio-demographic, psychological or individual factors influencing real estate price dynamics. Using quarterly data, we try to capture such effects by including relevant Google search engine query information into a set of standard fundamental variables. We perform fixed-effects regressions for a panel of 14 EU-countries comprising the years 2005-2013. As dependent variable the house price index (HPI) from Eurostat is employed. We find that Google data as a single aggregate measure of unobserved variables plays a substantial role in explaining house price developments.