European Business Schools Librarian's Group

ESSEC Working Papers,
ESSEC Research Center, ESSEC Business School

No DR 04006: The Paris Residential Market: Driving Factors and Market Behaviour 1973-2001

Michel Baroni (), Fabrice Barthélémy () and Mahdi Mokrane ()
Additional contact information
Michel Baroni: ESSEC Business School, Postal: ESSEC Bibliothèque, Avenue Bernard Hirsch - B.P. 50105, 95021 CERGY-PONTOISE CEDEX , FRANCE,
Fabrice Barthélémy: THEMA, University of cergy-Pontoise, Postal: 33, Bd du Port, 95011 CERGY-PONTOISE CEDEX , FRANCE,
Mahdi Mokrane: IPD France, Postal: 80, Ave de la Grande Armée, 75017 PARIS, FRANCE,

Abstract: In this paper we investigate the driving factors associated with the Paris apartment market. We explore a database of nearly 230 000 transactions for residential properties in the Paris area over the 1973 – 2001 period. We develop a factorial model that may capture the systematic link between residential prices and a set of predefined economic variables or a linear combination of these economic variables. We assume that capital growth rates in real estate are related to the variables we defined in the last paragraph. We measure this link which underlines the ‘true path’ of the real estate market: in that way we can develop an index as a function of many other indices. The methodology we develop, based on a multifactor approach to apartment price movements in the long run, has two main advantages over traditional indices. Firstly, we are able to identify the main driving factors for the Paris residential market. And secondly, the factors thus derived can be used to generate a “factor model” useful in comparison to existing capital growth indices and that provides valuable intuition for forecasting residential prices.

Keywords: Real estate indexes; Repeat sales; Risk factors

JEL-codes: C20; G00

24 pages, May 2004

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