This study examines the dynamic short- and long-run causal relationship between South African real house prices and key macroeconomic fundamentals (gross domestic product(GDP), mortgage rate, exchange rate-USDZAR, affordability, household debt to disposable income, unemployment rate, share prices (JSE ALL share index), foreign direct investment, and producer price index) over the period 2000Q1-2019Q4. The study uses a vector error correction model (VECM) to estimate the relationships while accounting for endogeneity and reverse causality. Although, there seems to be a significant association(both short and long-run) between house prices and all macroeconomic fundamental variables, GDP and producer price index appear to have the greatest impact. Further, our results suggest that any short-term disequilibrium in house prices always self-corrects in the long-run.
Copyright: © 2023 Lekhuleni, Ndlovu. This is an open access article distributed under the terms of the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited.