The impact of inflation on house prices in South Africa: effects of COVID-19
Date
2024-07
Journal Title
Journal ISSN
Volume Title
Publisher
University of the Witwatersrand, Johannesburg
WABER SuDBE Conference 2024
WABER SuDBE Conference 2024
Abstract
This study investigates the impact of inflation on house prices in South Africa, with a particular focus on the effects of the COVID-19 pandemic. The research aims to elucidate the nature of the relationship between inflation and housing, and to determine how the pandemic has influenced this dynamic. Utilising monthly data from January 2010 to April 2022, the study employs Johansen cointegration and Granger causality tests to assess long-term and causal relationships, respectively. The findings confirm a positive long-term relationship between house prices and inflation, indicating that housing serves as an effective hedge against inflation. However, the results also reveal structural breaks in this relationship, with significant changes observed during the COVID-19 period. The Vector Error Correction Model (VECM) highlights short-run adjustments and the speed of return to equilibrium. This study provides valuable insights for investors and policymakers, demonstrating the resilience of housing investments during economic disruptions and underscoring the importance of considering regional and temporal factors in real estate investment strategies.
Description
This paper was presented at the Proceedings of the WABER SuDBE 2024 Conference, 30th – 31st July 2024, University of the Witwatersrand, Johannesburg, South Africa.
Keywords
Covid-19, Granger causality test, House prices, Inflation, Johansen cointegration, South Africa
Citation
Mpofu, et al. (2024). The impact of inflation on house prices in South Africa: effects of COVID-19 In: Laryea, S. et al. (Eds) Proceedings of the WABER SuDBE Conference, 30 to 31 July 2024, Johannesburg, South Africa 1281-1295.