A Frequency Domain Analysis of Common Cycles in Property and Related Sectors

This paper examines cycles and common cycles in property and related sectors in the frequency domain. The frequency domain approach is empirically more effective in revealing cycle and common cycle features. It describes the closeness of two time series using coherence and phase as against correlation and leads/lags in the time domain. The study has found that property shares common cycles with a number of economic sectors and, in particular, with those sectors that are the user markets of property, and lags behind in business cycle phases. Property has large coherence at most frequencies with most economic sectors and the economy as a whole and is in the same phase at these frequencies with the latter. But, property seems to have large discrepancy with almost all the other sectors in the cycles at the annual frequency. The property market swings more severely than the economy as a whole. However, fluctuations are considered moderate in the property market relative to those in the housing market.