Housing prices in Lima

In this paper we estimate the equilibrium relationship between house prices per square meter in Lima and their macroeconomic fundamentals, from 1998.I to 2013.IV. We find that the terms of trade, the current account, mortgage loans, a rule-of-law index, demographics and market capitalization have impacts with the expected signs and statistically significant coefficients. Then, in order to assess whether house prices are misaligned with respect to their fundamentals, we generate 10,000 sequences of equilibrium prices, after bootstrapping the equilibrium relationship. Despite the increase in house prices recently observed, we find that house prices may not be misaligned with respect to their fundamentals. (Audio: Department of Economic Publications)