Residential property market determinants: evidence from the 2018 Australian market downturn

Abstract

Purpose The purpose of this paper is to validate and uncover the key determinants revolving around the Australian residential market downturn towards the 2020s. Design/methodology/approach Applying well-established time series econometric methods over a decade of data set provided by Australian Bureau of Statistics, Reserve Bank of Australia and Real Capital Analytics, the significant and emerging drivers impacting the Australian residential property market performance are explored. Findings Besides changes in the significant levels of some key traditional market drivers, housing market capital liquidity and cross-border investment fund were found to significantly impact the Australian residential property market between 2017 and 2019. The presence of some major positive economic conditions such as low interest rate, sustainable employment and population growth was perceived inadequate to uplift the Australian residential property market. The Australian housing market has performed negatively during this period mainly due to diminishing capital liquidity, excess housing supplies and retreating foreign investors. Practical implications A better understanding of the leading and emerging determinants of the residential property market will assist the policy makers to make sound decisions and effective policy changes based on the latest development in the Australian housing market. The results also provide a meaningful path for future property investments and investigations that explore country-specific effects through a comparative analysis. Originality/value The housing market determinants examined in this study revolve around the wider economic conditions in Australia that are not new. However, the coalesce analysis on the statistical results and the current housing market trends revealed some distinguishing characteristics and developments towards the 2020s Australian residential property market downturn.

International Real Estate Review

“…Above all, commercial property investment in Australia is relatively independent of the capital market and decoupled with economic conditions. This result is consistent with the previous literature which asserts that property investment demand in Australia will be less likely affected by local economic conditions or other domestic drivers due to large cross-border investment (Wong et al, 2019). From the policy perspective, the findings imply that the policies related to the regulation of foreign and cross-border investment in commercial property, coupled with the mechanisms that affect financing and gearing especially through the MLR and lending practices have significant impact on regulating or stimulating the investment market.…”

“…Existing studies also point out that property cycles have been recurrent but show irregular dynamics with different leads and lags on economic cycles (RICS, 1994, Giannotti andGibilaro, 2009). Within the context of the Australian property market, most of the existing and recent studies focus on residential properties, in terms of the dynamics of housing prices, housing affordability and housing bubbles (Ma et al, 2018, Wong et al, 2019, Wang et al, 2020, Guest and Rohde, 2017. There are few studies that examine the cyclic nature of the property markets in Australia especially the commercial property markets, in which a large volume of the extant research tends to examine the interlinkages of market movements across different regions in Australia.…”

Prospecting Housing Bubbles in Malaysia

“…When the demand increases, property players, especially developers, increase the supply of houses to meet demand as well as maximize the profits. Nevertheless, according to a study done by Wong et al (2019), population will affect the demand as a house may no longer be satisfactory whenever new members enter into a household through marriage or birth, and therefore new houses will be needed. The research also added, in a macro perspective, income and population density acting as a proxy for the population which determines the house price.…”

Performance of commercial and residential real estate investments in Ibadan property market, Nigeria

“…The Nigerian National Bureau of Statistics reports that the real estate sector contributed about 7.5% to its GDP in 2020. Globally, real estate has contributed immensely to the development of economies of many nations in many ways (Wong et al, 2019). For example, Kongela (2013) posited that in 2010, the commercial real estate's contributions to the GDP of the following countries were as follows: 28% for the US; 25% for Germany; 18% was recorded for France; in Italy, it was 15%; while it was found to be 28% for the UK and 8% for Spain.…”