House price bubble detection in Ukraine

What is it about?

The purpose of this paper is to present a framework for the assessment of the fundamental value of house prices in the largest Ukrainian cities, as well as to identify the thresholds, the breach of which would signal a bubble. House price bubbles are detected using two approaches: ratios and regression analysis. Two variants of each method are considered. We calculate the price-to-rent and price-to-income ratios that can identify a possible over- or undervaluation of house prices. Then, we perform regression analyses by considering individual multi-factor models for each city and by using a within regression model with one-way (individual) effects on panel data. The only pronounced and prolonged period of a house price bubble is the one that coincides with the Global Financial Crisis. The bubble signals produced by these methods are, on average, simultaneous and in accordance with economic sense.

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