A Roof Over Risk: A House Price-at-Risk Framework for Hungary

2026-02-20

AI Summary

This study investigates how housing subsidies, credit conditions, and supply-side factors drive the upside and downside risks in the distribution of house price growth in Hungary. By developing a House Price-at-Risk analytical framework that integrates quantile regression, adaptive LASSO variable selection, and time-varying uncertainty decomposition, the paper provides the first systematic evidence that housing subsidies are procyclical, significantly amplifying upper-tail (upside) risk while exerting limited impact on downside risk. It further reveals that the influence of supply-side factors reverses direction across time horizons: short-term downside risk is primarily driven by financial stress, whereas long-term risk is dominated by unemployment and housing affordability. These findings offer empirical support for macroprudential policy design from a distributional risk perspective.

Technology Category

• Reasoning under Uncertainty: Stochastic Optimization
• Machine Learning: Calibration & Uncertainty Quantification
• Game Theory and Economic Paradigms: Mechanism Design

Application Category

• Economics, Online Markets and Human Computation: The sharing economy
• Graph Algorithms and Modeling for the Web: Efficient manipulation of static and dynamic Web-related graphs
• Web Mining and Content Analysis: Robustness and generalizability of Web mining methods

Abstract

This paper develops a House Price-at-Risk framework to examine how housing subsidies, credit conditions, and supply factors influence the distribution of house price growth in Hungary. Using quantile regression with adaptive LASSO variable selection, we identify variables driving downside versus upside risks across multiple horizons. Financial stress dominates the lower tail at short horizons, while unemployment and affordability constraints become the primary drivers of downside risk at longer horizons. Housing subsidies exhibit pro-cyclical characteristics, concentrating significant positive effects on the upper quantiles while leaving the lower tail largely unaffected. Supply-side variables display horizon-dependent sign reversals, with construction permits exerting upward pressure on prices in the short run but moderating them as supply materialises. Uncertainty decomposition reveals persistent left-tail dominance across all horizons. These findings suggest that macroprudential frameworks should account for the distributional effects of housing subsidies, particularly their pro-cyclical influence on house price growth.

Problem

• House Price-at-Risk
• housing subsidies
• downside risk
• quantile regression
• macroprudential policy

Innovation

• House Price-at-Risk
• quantile regression
• adaptive LASSO
• distributional effects
• macroprudential policy