The magnitude and significance of macroeconomic variables in explaining regional housing fluctuations

This paper investigates the possible responses of housing returns to macroeconomic and global variables for four special municipalities in Taiwan (Taipei, New Taipei, Taichung and Kaohsiung) over the period 1991Q1 to 2010Q4. Two interesting results have been observed. First, the housing market shows distinct high-volatility and low-volatility cycles for each city due to idiosyncratic characteristics. The frequency of regime switches between high-volatility and low-volatility markets is strongest in Kaohsiung's housing market and is lowest in New Taipei and Taichung. Second, while the growth rate of GDP, aggregate stock return, the growth rate of CPI and aggregate housing return are able to affect regional housing returns, their effects are different in each city.