In this article we investigate the driving factors associated with the Paris apartment market in order to propose a new index. We explore a database of around 276 000 transactions for residential properties in the Paris area over the 1982 ¿ 2005 period. We develop a factorial model that may capture the systematic link between residential prices and a set of predefined economic variables or their linear combination. We assume that price growth rates are related to the variables we chose. We measure this link which underlines the ¿true path¿ of the real estate market in the sense that systematic factors can represent it. The methodology we develop to construct an index, based on a multifactor approach to apartment price movements in the long run, has two main advantages over traditional indices. Firstly, we are able to identify the main driving factors for the Paris residential market. As systematic factors they are able to represent the fundamental market evolution and allow the detection of a speculative behaviour during crisis periods. And secondly, the factors thus derived can be used to generate a “factor model” useful in comparison to existing price growth indices and that may provide valuable intuition for forecasting residential prices.
BARONI, M., BARTHELEMY, F. et MOKRANE, M. (2008). Un nouvel indice de risque immobilier pour le marché résidentiel parisien. Revue Economique, 59(1), pp. 99-118.