Housing price triggers and living conditions in the EU : insights from a structural dynamic analysis

This study analyses the main drivers of real house price index (HPI) variability in the 20 EA countries from 2005 to 2023, employing a Bayesian Structural Panel Vector Autoregression (S-PVAR) to depict the structural drivers. House price shocks are separated from the other sources of HPI variability considering their emergence together with supply side shocks, such as productivity and labour and, demand shocks: domestic and foreign private investment shocks monetary policy shocks and idiosyncratic HPI shocks. Local Projections (LPs) are then employed to recover the dynamic effects of the impact of housing prices on ten measures of the citizen's living conditions provided by the EU-SILC. The results show that HPI shocks can have severe implications for social conditions. The influence of these shocks on house prices and social conditions varies across regions.