RESEARCH ON HOUSING BUBBLES IN THE CAPITALS OF THE BALTIC AND CENTRAL EUROPE

Abstract

Economic prosperity was not only the Baltic states, other Central European countries in the region, such as Poland, Slovakia, the Czech Republic and Slovenia also faced worldwide growth - boom in housing prices which exceeded most analysts' forecasts and rational expectations. Therefore, this article examines and assesses how the global financial crisis, what started in the housing sector, affected similar economic development level countries by the calculation of price to income method approach for housing bubble size estimation in the Baltic countries and Central European countries capitals. Obtained results reveal that housing prices boom mostly affected the Baltic States capitals. The largest housing bubble of all Central European capitals was formed in Warsaw. Improvement of the economic situation, rising inhabitants income, decreasing unemployment, rising prices for construction and profitability of housing investment, at the same time rising issuance of housing loans is creating a highly favourable conditions for the housing price bubble formation.

DOI: http://dx.doi.org/10.5755/j01.em.17.2.2169