Bubbling Away: Forecasting Real Estate Prices, Rents, and Bubbles in a Transition Economy

Real housing prices have both surged and swooned in formerly socialist countries. We use 2000-2017 aggregate housing sales and rental price data from Kazakhstan to explore price movements during boom and stagnation eras, investigating the rent-price ratio's (RPR) capacity to predict housing returns and rent growth for an emerging post-Soviet economy. RPR predicts returns better during periods of price increases than declines, and its importance in predicting the bubble component diminishes with time. Short-run RPR changes are consistent with rational bubble behavior during the period of secular upswing but different predictive variables matter during price increases and declines.