Identification and Timing of Multiple Price Bubbles in Tehran Housing Market

Prior to the 2008 crisis, economists paid little attention to the role of the bubble and its detrimental effects on the real sector of the economy; But with the crisis, it became clear that the effect of the bubble in asset markets was not limited to nominal effects and could severely affect the real sector of the economy. Accordingly, the main purpose of this study is to investigate the existence of bubbles in the housing market and also to identify the exact time of its origination and collapse. In this regard, using the quarterly data of Tehran housing market in the period 1372: 1 to 1399: 3 and also using the new approach of Philips and Shi (2018), the existence of bubbles in this market was tested. The results of this study indicate that there is a price bubble in the housing market in some time periods in our sample. Examination of the real price as well as the price-to-earnings ratio indicates that there have been periods in our sample that have had very similar characteristics to bubble periods. The results obtained from the Phillips and Shi test also confirm this and indicate that the Tehran housing market has witnessed a price bubble in 1381, 1397, 1398 and 1399. Graphical analysis of bubble collapse periods also shows that after these periods, real prices in the housing market have decreased significantly. This is exactly in line with price behavior in bubble periods and confirms the results of previous tests.