Abstract
Developments in the commercial property market are an important factor affecting financial stability, especially given their effect on the probability of default of non-financial corporations. This article analyses the development of the office property markets in five central European countries and compares their main indicators with those for Germany.
It then formulates a simple error correction model of office property prices in relation to macroeconomic, demographic and structural determinants. The analysis reveals that both demand and supply factors (GDP, inflation and total office space), and partly also the maturity of the credit market, have an effect.
Using this model, property prices are identified as having been overvalued in 2006-2008. However, in the CR office space currently appears to be slightly undervalued.