Relationship between customers expectations and housing prices in transition economies

Vitalija Rudzkienė, Vytautas Azbainis


Transition economies originate when central management of the market transforms to a free market. Sudden changes can be a cause of significant consumer expectations, which contributes to market volatility.
Aim of this research is to reveal relationship between consumer’s confidence and housing price in Lithuania. In this research we come to these conclusions:
1. S udden change of regime, accompanied by privatization and embezzlement of state property, is the damaging process for transition economies. Therefore, the economic decline in Baltic countries was the largest comparing to other countries.
2. I n the process of joining European Economic and Monetary Union it is important to integrate with Euro area business cycle. Rapid integration and changes of monetary policy can lead to asymmetric shocks that could damage the country’s economic system.
3. The first hypothesis of our research stated that consumer opinion on economic trends and future changes evaluated by consumer confidence indicator indicates housing price changes in the future. This hypothesis is proven comparing housing price changes with the 1998 housing price.
4. S econd hypothesis stated that a confidence of different user group on economic trends and future changes is more accurate than the other. This hypothesis is not proven. The sum of correlation coefficient squares differ slightly, overall difference between the maximum and minimum values are less than 10 per cent of maximum value.
5. Comparing housing prices with 1998 price give us more accurate prediction of the time lag between housing prices and consumer confidence indicator changes.
6. When the housing price changes are calculated in comparison with 1998 prices, the highest correlation coefficient obtained when house prices are measured two years after the consumer’s confidence survey.
Findings of the research can provide a more accurate relationship between consumer confidence and housing market, but these results should be interpreted with caution, taking into account the fact that consumer surveys started in Lithuania only in 2001 and the housing prices are from 1998. Real estate market cycles are longer term usually. Therefore, to improve results, this research should be repeated by taking a longer time interval.


real estate market; transition economy; consumer expectations; consumer confidence indicator; housing prices

Full Text:

PDF (Lietuvių)


  • There are currently no refbacks.

"Business Systems & Economics" ISSN online 2029-8234