Impact of Consumer Confidence on House Prices in EU Member States

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Yana Stoencheva, Dragomir Stefanov

Abstract

The theme of this article is the study of the strength, direction and shape of the relationship between consumer confidence and residential real estate prices within the European Union. Reliable statistical data and established statistical methods were used to guarantee the reliability of the obtained results. What was found was a weak to moderate negative correlation between the studied variables, where the degree of adequacy of the used one-factor regression models, measured by the coefficient of determination, goes up with increasing lag of the used variables. That is, the studied correspondence would stand out more clearly if viewed in a long-term aspect. This would make a good reason to use changes in the level of consumer confidence in the economy to align medium-term investment strategies regarding the acquisition of residential properties. Owing to the serious dispersion of the relationship between consumer confidence and house price indices by individual countries, the linear form of the used lag model would definitely yield sufficiently good results; therefore, in our opinion, the complication thereof would be unjustified.

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