This paper examines the dynamics in the Danish housing market to identify whether there is an early-stage housing-bubble in the market today. Back in the mid 00’s the Danish housing prices increased intensely, and most economists agrees that there were unnaturally increases in the market. Therefore, many claimed that the Danish housing market was a victim of a house-price bubble. The consequences had a crucial impact on the financial stability and macroeconomic overall, and the result was extreme decreases in the market. Lately there have again been strongly increases in the house prices, and both media and economists are warning a bubble is dominating the housing prices. Therefore, we will investigate these statements, with an econometrical analysis. The results of the econometrical analysis could not explain all of the volatility in the housing-prices through fundamentals, but something indicated that there again was unnaturally price increases in Copenhagen. Therefore, we investigated alternative factors that could have an impact on the price volatility. We found that the prices are strongly influenced by human behavior and psychological aspects and that volatility in market prices and bubbles are natural because of the dynamics in macroeconomic variables. Therefore, we assess that to dampen the consequences of a bubble bursting, we need to incur the house buyers by making them more resistant to market changes and only use financial restrictions to take the top and the bottom of the price volatility.
|Educations||MSc in Finance and Accounting, (Graduate Programme) Final Thesis|
|Number of pages||130|