Interest rates and real estate dynamics: an analysis of property prices in advanced economies

Abstract

This thesis investigates the relationship between government bond yields and residential prices across several advanced economies. The study was carried out using different panel specifications to examine how this relationship changes when accounting for unobserved country-specific and time-specific factors. The OLS and country-fixed effects regressions show a significant negative relationship, aligning with traditional economic theory. However, when accounting for only time-fixed effects, the model indicates a significant positive relationship, while the two-way fixed effects regression shows a negative but non-significant association. Through the analysis of this connection across multiple countries, this study addresses the literature’s gaps and provides insights into the real estate industry. Keywords: Government Bond Yields, Real Estate, Fixed Effects, Interest Rates, Property Prices, panel study.