Residential Housing Market Spatial Dynamics in Central Europe

The Central European countries have experienced a decade of economic expansion succeeding the transition from previous state-commanded regime. Development of the markets together with subsequent economic integration provoked a fundamental reconstruction within their economies. This paper focuses on the real-estate sector and its response to the economic growth. Specifically, we explore the spatial dynamics of the residential housing market, and develop an empirical model at the regional scale. The research question is whether different regions respond differently to economic growth and how this difference could be explained. The spatiotemporal variation in real housing investment representing the supply side of the market is tested against varying indices that theoretically determine the demand side of the market. The explorative part documents spatiotemporal relationships in the observed levels and dynamic patterns between the real housing investment intensity, two economic variables (unemployment and income), and two demographic variables (natural and migration change) on an annual basis. Techniques employed belong to the framework of global and local spatial autocorrelation analysis. The spatial dynamics model in the second part adds macroeconomic variables that are expected to have a significant impact on the housing market. The spatial regression is estimated by means of ordinary least squares, spatial lag and spatial error models. All procedures are applied for the housing markets in the Czech Republic and in Slovakia for the period 2001-2007.