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Accounting for Longer‐Run Changes in Australian House Prices

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  • Glenn Otto

Abstract

Miles and Monro (2020) show a large proportion of the long‐run increase in real house prices in the United Kingdom is due to persistent, but unanticipated, declines in the risk‐free real interest rate. Applying their user cost method to Australia indicates longer‐run growth in real house prices is better accounted for by changes in the real mortgage rate than in the risk‐free rate, especially during the period 2004–2019. Declines in real mortgage rates during the COVID‐19 pandemic are consistent with long‐run growth in house prices in the range of 10–50 per cent.

Suggested Citation

  • Glenn Otto, 2021. "Accounting for Longer‐Run Changes in Australian House Prices," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 54(3), pages 362-374, September.
    • Handle: RePEc:bla:ausecr:v:54:y:2021:i:3:p:362-374
    DOI: 10.1111/1467-8462.12432
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    References listed on IDEAS

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    1. Glenn Otto & Nigel Stapledon, 2017. "How Predictable? Rent Growth and Returns in Sydney and Melbourne Housing Markets," Discussion Papers 2017-01, School of Economics, The University of New South Wales.
    2. Philip Inyeob Ji & Glenn Otto, 2015. "Explosive Behaviour in Australian Housing Markets: Rational Bubbles or Not?," Discussion Papers 2015-27, School of Economics, The University of New South Wales.
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    4. Shuping Shi & Arafat Rahman & Ben Zhe Wang, 2020. "Australian Housing Market Booms: Fundamentals or Speculation?☆," The Economic Record, The Economic Society of Australia, vol. 96(315), pages 381-401, December.
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    10. Trent Saunders & Peter Tulip, 2020. "A Model of the Australian Housing Market," The Economic Record, The Economic Society of Australia, vol. 96(S1), pages 1-25, June.
    11. Eden Hatzvi & Glenn Otto, 2008. "Prices, Rents and Rational Speculative Bubbles in the Sydney Housing Market," The Economic Record, The Economic Society of Australia, vol. 84(267), pages 405-420, December.
    12. Shuping Shi & Abbas Valadkhani & Russell Smyth & Farshid Vahid, 2016. "Dating the Timeline of House Price Bubbles in Australian Capital Cities," The Economic Record, The Economic Society of Australia, vol. 92(299), pages 590-605, December.
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