This paper empirically examines the effect of house price changes on economic growth across provinces
in South Africa. The economic impact of house prices is estimated using a panel data set that covers all
nine provinces in South Africa from 1996 to 2010. We find that when heterogeneity, endogeneity and
spatial dependence are controlled for, house price changes exhibit a significant effect on regional
economic growth in South Africa. The paper then introduces a Seemingly Unrelated Regression (SUR)
specification and shows that spatial effects are highly important in South African housing markets.
Moreover, the estimation results suggest that the wealth effect is important at the aggregated level which
contrasts the relevance of the collateral effect found at the regional level.