The effects of political, economic and financial components of country risk on housing prices in South Africa Paul-Francois Muzindutsi, Sanelisiwe Jamile, Nqubeko Zibani and Adefemi A. Obalade School of Accounting, Economics and Finance, College of Law and Management Studies, University of Kwazulu-Natal, Durban, South Africa Abstract Purpose – The housing market in South Africa has the potential to drive economic growth and attract foreign investment, but it can be affected by various risk factors. This paper aims to conduct an empirical analysis of the effect of country risk components on the housing market in South Africa. Design/methodology/approach – Linear and nonlinear autoregressive distributed lag (ARDL) models were used to evaluate the effects of the economic, financial and political risk factors of country risk on the prices of different segments of houses based on 276 monthly time-series data from January1995 to December 2015. Findings – First, the results established that the three housing indices were more sensitive to political risk in the long run. Second, short run results showed that the three housing indices were largely influenced by their own preceding adjustments in the short run albeit minimal influences from political risk. Third, large housing segments indicated a higher magnitude of the country risk effect in South Africa. Originality/value – This paper concluded that the response of housing prices to changes in the country risk components differed across the three segments of the housing market in South Africa. Consequently, this study presented the first comparison of the reactions of different housing segments to different components country risk. Keywords South Africa, Financial risk, Political risk, ARDL, Country risk, Housing price, Economic risk, Small housing, Medium housing, Large housing Paper type Research paper 1. Introduction Prior to the 1994 elections, housing prices in South Africa were keeping pace with the inflation rate (Luus, 2005). It became a national priority for the government after the 1994 elections to make provision for affordable housing for its citizens. As a result, the government introduced a series of housing policies with the aim of mobilizing housing finance through wholesale funding (financier) that would propound low-income household subsidized housing loans (Rust, 2006), such as the Reconstruction and Development Programme (RDP), which was later replaced with the Growth Employment and Redistribution (GEAR) programme (Snowdon and Vane, 2005). Investors’ confidence was restored post-apartheid, which contributed to the increase of the housing prices from 1994 Authors would like to acknowledge the contribution of Theolan Padayachee, Kaveshan Perumal and Andiswa Mbhele to the initial stage of this research project. Country risk on housing prices Received 19 May 2020 Revised 29 June 2020 Accepted 7 July 2020 International Journal of Housing Markets and Analysis © Emerald Publishing Limited 1753-8270 DOI 10.1108/IJHMA-05-2020-0060 The current issue and full text archive of this journal is available on Emerald Insight at: https://www.emerald.com/insight/1753-8270.htm