Price Bubbles in Real Estate Markets

The diploma thesis deals with the occurence of price bubbles in the real estate markets and with the consequences resulting from their existence for the monetary policy authorities and for the macroprudential supervision. At first, the nature of price bubbles, the circumstances of their occurence and downfall and the possibilities of their identification are explained, while they are divided into rational and irrational bubbles. This is followed by the characteristics of the real estate market, by a description of its operation and by assessment of its specifics compared to the markets of other assets, while the real estate market is characterized by several market imperfections which constantly prevent it from heading to the equilibrium. Next part of the thesis refers to the analysis of the potential price bubble in the current Czech real estate market, separately for both the residential and the commercial segment of the market. Attention is paid to the central bank's response to current developments. In the last part, the thesis focuses on the implications of the impact of price bubbles on the real estate markets for the central banks' monetary policy and for macroprudential supervision authorities. The thesis also discusses the importance of asset prices in the context of inflation targeting and the importance of the role of real estate markets in systemic financial crises