A New Zealand Regional Housing Model

Abstract

The New Zealand Regional Housing Model (NZRHM) includes estimated equations for four key housing market variables: house prices, housing supply (new dwelling consents), residential vacant land (lot) prices, and average rents. Long run (cointegration) relationships and short run (error correction) relationships are estimated for each of these variables across 72 TLAs within New Zealand. The model is designed so that it can be used for short to medium term forecasting. It is also useful for simulating the effects of shocks to the housing market. The paper presents simulations of the impacts of shocks to exogenous variables (population, credit restrictions, construction costs and farm prices) as well as shocks to policy variables (developer contributions, accommodation supplement, and land availability). We also simulate the consequences of the Christchurch earthquakes for Canterbury housing outcomes. The over-arching conclusion across all simulations is that housing markets are very slow to adjust to disequilibria, such that exogenous shocks have very long lasting effects on prices and the housing stock.

Do housing allowances increase rents? Evidence from a discrete policy change

“…Stroombergen (2004) models the aggregate historical relationship between market rents and AS. In contrast to the findings of Grimes et al (2013), Stroombergen finds very small and statistically insignificant effects of AS on average rent, little evidence of an effect on lower-quartile rents, and also minimal effect on Auckland rent.…”

“…The only New Zealand research on the effects of the AS on rent are two aggregate analyses. Grimes et al (2013) developed an aggregate housing market model to analyse responses to exogenous shocks and policy changes. Simulations of the impact of increasing AS find, in the short run, higher rents that result directly from assistance to renters, which persist in the long run because of higher house prices from AS assistance to home-owners.…”

New Zealand Census 2013: A short commentary on the role which the Census plays and the findings of the 2013 Census

“…One reason that such population changes are important to the real world is their effect on housing markets (Takáts ; Grimes et al . ).…”

“…Natural increases in population (births minus deaths) are reasonably stable over time, but net migration (emigration minus immigration) tends to fluctuate much more. One reason that such population changes are important to the real world is their effect on housing markets (Takáts 2012;Grimes et al 2013).…”

Housing Markets and the Global Financial Crisis: The Complex Dynamics of a Credit Shock

“…The New Zealand Regional Housing Model (NZRHM) that we use for our simulations (Grimes and Hyland ; henceforth GH) is an extended version of the model in Grimes and Aitken () (henceforth GA) that modeled housing supply and house prices across New Zealand territorial local authorities (TLAs), which correspond to city or district councils. Along with modeling house prices and housing supply, the NZRHM models both residential vacant land (lot) prices and rents.…”