Trends and Spectral Response: An Examination of the US Realty Market

This paper sets out to consider whether changes in economic fundamentals in the United States can impact on international real estate markets. To this end a two-step approach is pursued. In the first step cointegration techniques are used to determine whether common trends exist in international property markets. Once common trends are identified amongst securitised property markets, a potential common driver is isolated by substituting US Gross Domestic Product for US property. The paper then uses a spectral response technique to examine the impulse response between shocks in the US economy and reactions in foreign real estate markets. The results support a linkage between the economic growth of an important member of the international economic community and international real estate performance.