MACRO DYNAMICS OF THE REAL ESTATE MARKET VALUE: TEMPORAL EFFECTS
Keywordsreal estate, market value, price, volatility, housing, architecture
AbstractThe aim of this research is to establish a methodological background for understating the real estate macro dynamics and the role played by architecture in explaining the real estate market value fluctuations. Although various models of the housing market fluctuations have been developed, the fundamental question of what drives the real estate market value is still peculiarly neglected. Housing market value fluctuations can be largely explained by macroeconomic fundamentals, housing market indicators as well as the social, political and cultural situation. After assessing these fundamentals of the real estate market value, other factors may be added such as short-term dynamics and irrational factors, contributing to an instantaneous unpredictability of the real estate market. Nowadays there is a belief in society that housing is an investment opportunity. An assumption can be made about the speculative and irrational nature of the housing market, having impact on the real estate market value. Comparing the housing market to the stock market, the housing market has much higher cost of carry and complicated administration to it; and therefore, the real estate market is highly inefficient. Because of the irrational nature of human behavior, similarly to stock prices, the housing market is driven by expectations. The originality of this research lies in the fact that irrationality of human behavior suggests looking at other sciences, with architecture being a tool to bring those irrationalities into the real estate market. Given that behavioral economics accounts for a significant part of irrationality of market behavior, the hypothesis can be ventured that architecture, as a human interaction in the process, can have its own causal role in fixing real estate market value.
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