IMF Working Papers

Assessing House Prices with Prudential and Valuation Measures

By Michal Andrle, Miroslav Plašil

March 18, 2019

Download PDF

Preview Citation

Format: Chicago

Michal Andrle, and Miroslav Plašil. Assessing House Prices with Prudential and Valuation Measures, (USA: International Monetary Fund, 2019) accessed November 21, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

In this paper we provide tools for assessing the house prices and housing valuation. We develop two approaches: (i) borrowing capacity approach, and (ii) intrinsic value approach. The borrowing capacity of households, together with their down payment, implies how much housing they can attain. In the intrinsic value approach, property value is viewed as a discounted present value of adjusted net rental income. Our approach does not involve a complex econometric model and only widely available data are used. The proposed indicators can guide households, financial markets and macroprudential authorities in their understanding of house prices development. To illustrate the concepts, we analyze the housing prices in the Czech Republic and assess the degree of market over-and undervaluation.

Subject: Asset and liability management, Asset valuation, Financial institutions, Housing, Housing prices, Loans, Mortgages, National accounts, Personal income, Prices

Keywords: Apartment price, Asset valuation, Borrowing capacity, Cost of capital, Down payment, Financial stability, Forecast point of view, House prices, House prices in the Czech Republic, Household income, Housing, Housing prices, Intrinsic value, Money terms, Mortgage interest rates, Mortgages, Observed price, Opportunity cost, Personal income, Present value, Price, Price map, Rental income, Sensitivity analysis, WP

Publication Details

  • Pages:

    42

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    Working Paper No. 2019/059

  • Stock No:

    WPIEA2019059

  • ISBN:

    9781498302814

  • ISSN:

    1018-5941

You May Also Be Interested In...

Guidance Note On The Financing Assurances And Sovereign Arrears Policies And The Fund's Role In Debt Restructurings

November 18, 2024

Quarterly Projection Model for the Bank of Ghana: Extensions and Applications

November 15, 2024

Libya: Technical Assistance Report-Redesign of Income Tax Forms

November 15, 2024

Growth Convergence and Public Finances of India and its States

November 15, 2024