Forecasting future trends in
Dubai housing market by using
Box-Jenkins autoregressive
integrated moving average
Ali Heps¸en
Department of Finance, Faculty of Business Administration, Istanbul University,
Istanbul, Turkey, and
Metin Vatansever
Department of Mathematics and Statistics, Faculty of Arts and Science,
Yıldız Technical University, Istanbul, Turkey
Abstract
Purpose – It is important to forecast index series to identify future rises, falls, and turning points in
the property market. From the point of this necessity and importance, the main purpose of this paper is
to forecast the future trends in Dubai housing market.
Design/methodology/approach – This paper uses the monthly time series of Reidin.com Dubai
Residential Property Price Index (DRPPI) data. In order to forecast the future trends in Dubai housing
market, Box-Jenkins autoregressive integrated moving average (ARIMA) forecasting method is
utilized.
Findings – The results of the ARIMA modeling clearly indicate that average monthly percentage
increase in the Reidin.com DRPPI will be 0.23 percent during the period January 2011-December 2011.
That is a 2.44 percent increase in the index for the same period.
Practical implications – Reidin.com residential property price index is a crucial tool to measure
Dubai’s real estate market. Based on the current index values or past trend, real estate investors
(i.e. developers and constructors) decide to start new projects. Attempts have also been made in the
past to forecast index series to identify future rises, falls, and turning points in the property market.
The results of this paper would also help government and property investors for creating more
effective property management strategies in Dubai.
Originality/value – There is no previous study analyzing the future trends in Dubai housing
market. At this point, the paper is the first academic study that identifies this relationship.
Keywords Dubai, Real estate, Residential property, Price index, Forecasting, Box-Jenkins,
Autoregressive integrated moving average (ARIMA)
Paper type Research paper
Introduction
There are a lot of individuals or organizations using residential property price indices
directly or indirectly either to influence practical decision making and conduct of
economic policy. Analysts, policymakers, investors, and financial institutions follow
trends in house prices to expand their understanding of real estate and credit market
conditions, as well as their impact on economic activity, and financial stability and
soundness (Case and Wachter, 2005). For instance, mortgage lenders use this
information to gauge default risk and central banks often rely on movements in house
price indices to track households borrowing capacity (Finocchiaro and Queijo, 2009)
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/1753-8270.htm
IJHMA
4,3
210
Received 6 November 2010
Accepted 8 February 2011
International Journal of Housing
Markets and Analysis
Vol. 4 No. 3, 2011
pp. 210-223
q Emerald Group Publishing Limited
1753-8270
DOI 10.1108/17538271111153004
@Phil_Robichaud
@deepthiw
@JoseServera