Abstract:
This study tests for house price bubbles in the South African housing market using
quarterly data from 1969:Q2 to 2009:Q3, based on the unit root test developed by
Phillips, Wu, and Yu (2010). The findings indicate house price bubbles in the
aggregate, large, medium, and small-middle segments, but not in the luxury and
affordable segments. Next, symmetric and asymmetric versions of an Error Correction
Model (ECM) are used to investigate the spillover effects from the housing sector
onto consumption. Results indicate significant and asymmetric spillovers, with
consumption responding significantly to house price deceleration, although there is
no evidence of the effect being higher during the bubble period.
