New Zealand Housing Markets: Just a Bit-Player in the A-League?

Motu Economic and Public Policy Research Working Paper No. 10-07

32 Pages Posted: 9 Sep 2010

See all articles by Arthur Grimes

Arthur Grimes

Motu Economic and Public Policy Research Trust

Mark J. Holmes

University of Waikato - Management School, Department of Economics

Nicholas Tarrant

University of Otago

Date Written: September 7, 2010

Abstract

House price trends in each of New Zealand and Australia are frequently discussed as national level developments. Sub-national developments are also important, especially where regions display idiosyncratic trends driven either by demand factors (differential income patterns) or by supply factors (geographical or regulatory restrictions). At a broader scale, it is possible that the New Zealand housing market, or a specific regional housing market (e.g. Auckland), is part of a broader Australasian housing market. If this were the case, New Zealand house prices would converge to a broadly stable ratio of house prices in Australia. One reason this could occur is if international macroeconomic and asset price trends dominate housing market outcomes. New Zealand authorities may then be relatively powerless to control the major real determinants of house prices through regulatory or other policies. We extract the major drivers of house prices at regional levels within New Zealand and Australia to examine the degree of differentiation across regional housing markets. While some minor regional differences are apparent, the evidence points to the dominance of a single trans-Tasman housing trend.

Keywords: House price convergence, international housing markets, Australasia

JEL Classification: R21, R31

Suggested Citation

Grimes, Arthur and Holmes, Mark J. and Tarrant, Nicholas, New Zealand Housing Markets: Just a Bit-Player in the A-League? (September 7, 2010). Motu Economic and Public Policy Research Working Paper No. 10-07. Available at SSRN: https://ssrn.com/abstract=1673625 or http://dx.doi.org/10.2139/ssrn.1673625

Arthur Grimes (Contact Author)

Motu Economic and Public Policy Research Trust ( email )

19 Milne Terrace
Island Bay
Wellington 6002
New Zealand

Mark J. Holmes

University of Waikato - Management School, Department of Economics ( email )

Hamilton
New Zealand

Nicholas Tarrant

University of Otago ( email )

P.O. Box 56
Dunedin, Otago 9010
New Zealand

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