Real Estate Bubbles and Contagion: Evidence from Selected European Countries


  • Jean-Louis Bago Laval University, Department of Economics
  • Imad Rherrad Governement of Quebec, Department of Finance
  • Koffi Akakpo Laval University, Department of Economics
  • Ernest Ouédraogo University Ouaga 2, Department of Economics


Bubble, Contagion, real estate, Europe


Using quarterly housing price-to-rent ratios from 1970 to 2018, this paper investigated the presence of real estate bubbles at a national level in eight selected European countries, namely Belgium, France, Germany, Italy, the Netherlands, Portugal, Spain, and the United Kingdom. Then, we analyzed bubbles contagion among these countries. We applied the generalized sup ADF test developed by Phillips et al. (2015) to detect explosive behavior in house prices. Subsequently, we implemented the non-parametric model with time varying coefficients developed by Greenaway-McGrevy and Phillips (2016) to estimate bubbles contagion among European real estate markets. We found evidence of at least one historical bubble in all these countries, with Germany, the Netherlands, Portugal, and Spain currently experiencing a rising bubble. The results also suggest that bubbles are contagious between these real estate markets.