House price changes in Iran is a category for thinking about in recent years and also different studies has been done on determinants of housing supply and demand and its price. However, this study deals with causality relation between house price and its determinant factors by seasonal data in Tehran between “1994-2006".
In this study, Vector Error Correction, is used to estimate the model. Moreover, Wald test is utilized for the study of causality relation in long-run and short-run. The results show that all of the model variables can be significantly determinant of house price.
In short-run, land price, the wholesale of building materials, and gold price (as substitution market) have a bilateral causality relation with house price. Forthermore, there exists a unilateral causality among the average of household income and private sector investment in house building, as complete buildings, with housing price. Nevertheless, in the short-run Granger causality between house price and interest rate was not confirmed. On the other hand, the high significance of the coeffeceint of partial error correction in all of the estimated equations as well as integrated tests with model dependent variables reveals existence of a long-run relation.