<abstract xmlns="http://www.w3.org/1999/xhtml"><p> The aim of the paper is to analyze the recent dramatic increase in housing prices in Kragujevac, related to the opening of a multinational company facility. The main question is whether increasing house prices have been driven by market fundamentals or by speculative behaviour of the market players. We have decomposed variables influencing house prices in Kragujevac into supply and demand driven fundamentals to explore speculative ‘bubbles’ and detected the evidence of irrationally exuberant investors (constructors and buyers). The findings show a lack of rational behaviour among market players, absence of fundamentaldriven influence on real estate prices and expectancy-driven prices. The main characteristic is a strong relationship between price and rental price with no significant change in price-rent ratio.</p></abstract>

The aim of the paper is to analyze the recent dramatic increase in housing prices in Kragujevac, related to the opening of a multinational company facility. The main question is whether increasing house prices have been driven by market fundamentals or by speculative behaviour of the market players. We have decomposed variables influencing house prices in Kragujevac into supply and demand driven fundamentals to explore speculative ‘bubbles’ and detected the evidence of irrationally exuberant investors (constructors and buyers). The findings show a lack of rational behaviour among market players, absence of fundamentaldriven influence on real estate prices and expectancy-driven prices. The main characteristic is a strong relationship between price and rental price with no significant change in price-rent ratio.

Can a Multinational Company Create a Real Estate “Bubble” at the Local Level? The Case of Fiat and City of Kragujevac

Faculty of Economics, University of Kragujevac, Serbia

PhD Candidate, Faculty of Economics, University of Kragujevac, Serbia

Economic Themes

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 License.

The aim of the paper is to analyze the recent dramatic increase in housing prices in Kragujevac, related to the opening of a multinational company facility....

Can a Multinational Company Create a Real Estate “Bubble” at the Local Level? The Case of Fiat and City of Kragujevac

Published Online: Apr 15, 2016

Page range: 519 - 534

Received: Feb 10, 2015

Accepted: Sep 24, 2015

DOI: https://doi.org/10.1515/ethemes-2015-0030

Keywords
real estate market, fundamentals, price-rent ratio, irrational expectations, multinational company

© 2016

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 License.

Can a Multinational Company Create a Real Estate “Bubble” at the Local Level? The Case of Fiat and City of Kragujevac

Published Online: Apr 15, 2016

Page range: 519 - 534

Received: Feb 10, 2015

Accepted: Sep 24, 2015

DOI: https://doi.org/10.1515/ethemes-2015-0030

Keywordsreal estate market, fundamentals, price-rent ratio, irrational expectations, multinational company

© 2016

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 License.

Keywords
real estate market, fundamentals, price-rent ratio, irrational expectations, multinational company