Australian Housing Market Booms: Fundamentals or Speculation?

26 Pages Posted: 4 Sep 2019

See all articles by Shuping Shi

Shuping Shi

Department of Economics, Macquarie University

Arafat Rahman

Macquarie University

Ben Zhe Wang

Macquarie University, Macquarie Business School

Date Written: July 26, 2019

Abstract

This paper investigates the presence of housing bubbles in Australia at the national, capital city, and local government area (LGA) levels. We control for housing market demand and supply fundamentals using the technique of Shi (2017), and employ the recursive evolving method proposed by Phillips et al. (2015a,b) for the detection of explosive bubbles. While the national-level analysis suggests a short-lived bubble episode (2017:Q3) over the entire sample period from 1999 to 2017, the results from the capital-city-level data reveal substantial heterogeneity across cities, with only short-lived and isolated bubbles identified for Sydney and Melbourne during the recent rapid housing price expansions from 2013 to 2017. The LGA-level analysis suggests that the bubbles in Sydney and Melbourne have low intensity.

Keywords: housing price, speculation, economic fundamental, decomposition, vector autoregressive model, PSY procedure

JEL Classification: R31, R39, C22

Suggested Citation

Shi, Shuping and Rahman, Arafat and Wang, Ben Zhe, Australian Housing Market Booms: Fundamentals or Speculation? (July 26, 2019). Macquarie Business School Research Paper . Available at SSRN: https://ssrn.com/abstract=3447046 or http://dx.doi.org/10.2139/ssrn.3447046

Shuping Shi (Contact Author)

Department of Economics, Macquarie University ( email )

New South Wales 2109
Australia

Arafat Rahman

Macquarie University ( email )

North Ryde
Sydney, New South Wales 2109
Australia

Ben Zhe Wang

Macquarie University, Macquarie Business School ( email )

New South Wales 2109
Australia

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
37
Abstract Views
217
PlumX Metrics