A Model of the Australian Housing Market

Reserve Bank of Australia Discussion Paper Series 2019-01

41 Pages Posted: 5 Apr 2019

See all articles by Trent Saunders

Trent Saunders

Reserve Bank of Australia

Peter Tulip

Reserve Bank of Australia

Date Written: March 8, 2019

Abstract

We build an empirical model of the Australian housing market that quantifies interrelationships between construction, vacancies, rents and prices. We find that low interest rates (partly reflecting lower world long-term rates) explain much of the rapid growth in housing prices and construction over the past few years. Another demand factor, high immigration, also helps explain the tight housing market and rapid growth in rents in the late 2000s. A large part of the effect of interest rates on dwelling investment, and hence GDP, works through housing prices.

Keywords: housing, construction, house prices, vacancies, rents

JEL Classification: E17, R30, R31

Suggested Citation

Saunders, Trent and Tulip, Peter, A Model of the Australian Housing Market (March 8, 2019). Reserve Bank of Australia Discussion Paper Series 2019-01. Available at SSRN: https://ssrn.com/abstract=3350872 or http://dx.doi.org/10.2139/ssrn.3350872

Trent Saunders

Reserve Bank of Australia ( email )

65, Martin Place
Sydney, NSW 2000
Australia

Peter Tulip (Contact Author)

Reserve Bank of Australia ( email )

GPO Box 3947
Sydney, NSW 2001
Australia
61-2-9551-8831 (Phone)

HOME PAGE: http://www.petertulip.com

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