International House Price Convergence: Housing Dynamics in a Globalist Perspective

Abstract

The aim of this study is to examine convergence behaviour of housing prices and underlying common factors for an international sample of cities. The framework is derived from a spatial utility equilibrium model. A novel regression-based convergence test is used to detect house price convergence. The overall sample shows divergence, while convergence is found for subgroups of cities. In relation to the model framework, the results of a logistic regression suggest that GDP per capita growth and population growth have a significantly positive influence on convergence club membership and consequently on the house price convergence level. Derived policy recommendations suggest that in light of increasing wealth inequality, measures must be taken to ensure that housing keeps being affordable for everyone. Furthermore, high housing supply elasticity must be ensured so that cities are flexible to respond to rapid increases of urban population.