FFA Working Papers 5:002 (2023)936

Key determinants of new residential real estate prices in Prague

David Mazáček, Jiří Panoš
University of Economics Prague

The real estate residential market plays a crucial role in the economy and personal savings of a significant portion of the population. In recent years, the pricing of new apartments in Prague and other major European cities has experienced rapid growth, but also a sharp decline during the global financial crisis of 2008. The purpose of this paper is to describe the relationship between the selling price per square meter of new residential developments in Prague and the macroeconomic determinants, as well as real estate sector variables. The econometric model developed for this study is based on quarterly observations from 2005 to 2021 and utilizes statistical learning techniques of lasso regularization combined with Bayesian model averaging (BMA). The primary objective is to employ the model to identify the main determinants and provide insights into the price dynamics of new residential units. The outcomes of the model suggest that the set of variables selected in this paper provides a good explanation of the developments in real estate prices.

Keywords: Real Estate, Pricing, Macroeconomic variables, ADL (autoregressive distributed lag) lasso regularization, BMA (Bayesian model averaging)

Received: June 5, 2022; Revised: April 11, 2023; Accepted: April 26, 2023; Published online: January 1, 2023  Show citation

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Mazáček, D., & Panoš, J. (2023). Key determinants of new residential real estate prices in Prague. FFA Working Papers, 5, Article 2023.002. https://doi.org/10.XXXX/xxx.2023.003
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