Synchronisation and commonalities in metropolitan housing market cycles

Abstract

This paper examines the degree of commonalities present in the cyclical behavior of the eight largest metropolitan housing markets in Australia. Using two techniques originally in the business cycle literature we consider the degree of synchronization present and secondly decompose the series' into their permanent and cyclical components. Both empirical approaches reveal similar results. Sydney and Melbourne are closely related to each other and are relatively segmented from the smaller metropolitan areas. In contrast, there is substantial evidence of commonalities in the cyclical behavior of the remaining cities, especially those on the Eastern and Southern coasts of Australia.

Dating the Timeline of House Price Bubbles in Australian Capital Cities

“…Melbourne had a bubble towards the end of 2015 based on the 95 per cent critical value, but it disappeared in January 2016. This result provides some support for the findings in other studies of Australian housing markets, employing alternative methodologies, that the Sydney market and, to a lesser extent, the Melbourne market behave differently than those of the other capital cities (see, for example, Costello et al ., ; Akimov et al ., ; Valadkhani & Smyth, ). In Melbourne and Sydney, housing prices have been driven by strong growth in demand for inner‐city housing, both from negatively geared domestic investors and from foreign investors from Asia and, in particular, China (Birrell & Healy, ; Valadkhani & Smyth, 2015).…”

Self-exciting effects of house prices on unit prices in Australian capital cities

“…In particular, the increased spatial dimension provides an interesting context in which to examine the relationship between house and unit prices. As Akimov et al (2015) noted, while Australia's population is just 36% of the UK and 7% of the US, its geographic size is similar to the latter. The Australian population is geographically diverse with a high concentration in a few major cities along the south eastern seaboard.…”

The Role of Tax and Subsidy Policy in Driving Australian House Prices

“…Spatial analysis of the Australian housing market has been examined by Ma and Liu (2014), Akimov et al (2015) and Lim and Tsiaplias (2018). Spatial analysis of the Australian housing market has been examined by Ma and Liu (2014), Akimov et al (2015) and Lim and Tsiaplias (2018).…”

“…More recently, researchers have been motivated to identify spatial relationships between housing markets across Australia. Spatial analysis of the Australian housing market has been examined by Ma and Liu (2014), Akimov et al (2015) and Lim and Tsiaplias (2018). Whether using methods traditionally associated with the business cycle literature or explicit convergence models, the common finding in this literature is that there is substantial differentiation in house price drivers.…”