Measuring a Boom and Bust: The Sydney Housing Market 2001-2006

29 Pages Posted: 25 Jun 2009

See all articles by Robert J. Hill

Robert J. Hill

UNSW Australia Business School, School of Economics

Daniel Melser

UNSW Australia Business School, School of Economics

Iqbal A. Syed

UNSW Australia Business School, School of Economics

Date Written: June 24, 2009

Abstract

The Sydney housing market peaked in 2003. The period 2001-2006 is, therefore, of particular interest since it captures a boom and bust in the housing market. We compute hedonic, repeat-sales and median price indexes for five regions in Sydney over this period. While the three approaches are in broad agreement regarding the timing of the turning point in the housing market, some important differences also emerge. In particular, we find evidence of sample selection bias in our hedonic and repeat-sales data sets, which in turn seems to generate bias (although in opposite directions) in our hedonic and repeat-sales indexes. The median indexes also may be biased as a result of an apparent decline in the average quality of houses sold in the latter part of the sample. Although in this case the repeat-sales indexes seem to generate the most reliable results, we nevertheless in general favor the hedonic approach. We also find evidence of convergence in prices across regions during the boom and divergence in the subsequent bust.

Keywords: House prices, Price index, Hedonic regression, Repeat-Sales index, Sample selection bias, Convergence

JEL Classification: C23, C43, E31

Suggested Citation

Hill, Robert James and Melser, Daniel and Syed, Iqbal A., Measuring a Boom and Bust: The Sydney Housing Market 2001-2006 (June 24, 2009). UNSW Australian School of Business Research Paper No. 2009 ECON 08. Available at SSRN: https://ssrn.com/abstract=1425247 or http://dx.doi.org/10.2139/ssrn.1425247

Robert James Hill (Contact Author)

UNSW Australia Business School, School of Economics ( email )

High Street
Sydney, NSW 2052
Australia

Daniel Melser

UNSW Australia Business School, School of Economics ( email )

High Street
Sydney, NSW 2052
Australia
+61 2 9385 1567 (Phone)
+61 2 9313 6337 (Fax)

Iqbal A. Syed

UNSW Australia Business School, School of Economics ( email )

High Street
Sydney, NSW 2052
Australia

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