Macro drivers of Australian housing affordability, 1985-2010: An autoregressive distributed lag approach
AbstractPurpose – Model the drivers of Australian housing affordability and forecast equilibrium affordability. The paper aims to discuss these issues. Design/methodology/approach – Uses autoregressive distributed lag (ARDL) approach to model housing affordability measured by the Housing Industry Association's Housing Affordability Index (HAI) and the housing price-earnings multiplier (HPE). Six sets of explanatory variables, including housing finance, housing construction activity and costs, economic growth, population, alternative investments and taxation. Findings – Primary long-run drivers are housing finance, dwelling approvals and financial assets. Economic and population growth only have a short-run influence, while housing taxation has limited impact in long run. Forecasts indicate long-run HAI equilibrium values of 109 (above the historical minimum of 107) and a HPE of seven (below the recent historical maximum of 8.2). Research limitations/implications – Reduced form model encompassing both demand and supply factors involves complicated interpretation given direct and indirect effects on affordability. Analysis at national level ignores regional impacts that may also affect housing affordability. Practical implications – The impact of the low rate of new dwelling approvals (public and private sector in the long run and public sector in the short run) points to a persistent structural gap between the demand and supply of housing. Strong economic and population growth often blamed for the worsening of housing affordability, at least in the 2000s, has no impact at the aggregate national level. Originality/value – Only known paper to provide quantitative estimates of macro drivers of Australian housing affordability over a long period using alternative measures of relative housing affordability.
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Bibliographic InfoArticle provided by Emerald Group Publishing in its journal Studies in Economics and Finance.
Volume (Year): 30 (2013)
Issue (Month): 4 (April)
Pages: 347 - 369
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Web page: http://www.emeraldinsight.com
Postal: Emerald Group Publishing, Howard House, Wagon Lane, Bingley, BD16 1WA, UK
Other versions of this item:
- Andrew C. Worthington & Helen Higgs, 2011. "Macro drivers of Australian housing affordability, 1985–2010: An autoregressive distributed lag approach," Discussion Papers in Finance finance:201116, Griffith University, Department of Accounting, Finance and Economics.
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models &bull Diffusion Processes
- R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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