Bubbles in the Australian housing market

Research output: Contribution to journalArticle

5 Citations (Scopus)

Abstract

This paper analyzes the evolution of Australian property prices, the relationships between cities, houses and units, the stock market and monetary policy. Using monthly house and unit prices for all eight capital cities we identify extended periods of explosive positive price changes followed by comparatively small corrections and no crashes. A comparison with Australian equity prices further reveals that the average risk and return are more favorable in the housing market emphasizing fundamental differences of the two markets such as liquidity and short-sale constraints. We also find evidence for financial contagion from the equity market to the housing market. A Vector Autoregression (VAR) shows that house price changes have a relatively strong effect on cash rate changes and thus monetary policy. The relative stability of Australian property prices over the last 20 years suggests that policy makers played a role by providing an accommodating environment.

Original languageEnglish
Pages (from-to)113-126
Number of pages14
JournalPacific Basin Finance Journal
Volume44
DOIs
Publication statusPublished - 1 Sep 2017

Fingerprint

Bubble
Monetary policy
Price changes
Property prices
Housing market
Crash
House prices
Financial contagion
Politicians
Equity markets
Risk and return
Equity prices
Liquidity
Cash
Short-sale constraints
Stock market
Vector autoregression

Cite this

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Bubbles in the Australian housing market. / Baur, Dirk G.; Heaney, Richard.

In: Pacific Basin Finance Journal, Vol. 44, 01.09.2017, p. 113-126.

Research output: Contribution to journalArticle

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