The influence of non-price factors on the market with new building - Case study for Warsaw and Prague

Abstract

Purpose of the article The purpose of this article is to identify the factors influencing the number of building permits in the capital city of Warsaw and the capital city of Prague. The influence of macroeconomic, microeconomic, and demographic factors is examined.

Methodology/methods This study uses secondary data from the Polish Statistical Office and the Polish National Bank. Other data is taken from Czech Statistical Office and EUROSTAT. General scientific methods are Granger causality and multifactor regression.

Scientific aim The global focus of the article is econometric modeling. A particular center uses these models to evaluate the impact of factors for which enough data samples are not established. The evaluation of two distinct regions will estimate the significance of unique factors, their agreement, and possible variations.

Findings A key indicator of market development is the number of building permits. This variable represents the novelty of the approach. Previous approaches have defined this change as marginal; the approach presented here shows the number of building permits concerning other real estate market parameters.  This article's findings are primarily relevant for the supply and demand side, i.e., for citizens and building companies. Furthermore, the results show a clear link between the number of building permits and economic growth.

Conclusions GDP growth is a statistically significant factor in the growth in the number of building permits for the capital city of Warsaw and the capital city of Prag. GDP is a common factor for both selected cases. A statistically significant factor for the case of Warsaw is the Average Wage Index. These factors are significant at all levels. At lower levels of significance, the Housing Price Index and Number of Inhabitants are significant for Warsaw. In the case of Prague, it is only the Consumer price index. Granger's causality showed that the GDP variable is statistically significant for both the case of Warsaw and the case of Prague. In the case of Prague, this is a dual causality, which has not been confirmed in the case of Warsaw

Keywords: New residence building; Granger causality; Determinants; Multiple regression; GDP.

JEL Classification:  R21, R31, C23