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Housing Fever in Australia 2020-2023: Insights from an Econometric Thermometer

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Listed:
  • Shuping Shi

    (Macquarie University)

  • Peter C. B. Phillips

    (Yale University)

Abstract

Australian housing markets experienced widespread and, in some cases, extraordinary growth in prices between 2020 and 2023. Using recently developed methodology that accounts for fundamental economic drivers, we assess the existence and degree of speculative behaviour as well as the timing of exuberance and downturns in these markets. Our findings indicate that speculative behaviour was indeed present in six of the eight capital cities at some time over the period studied. The sequence of events in this nation-wide housing bubble began in the Brisbane market and concluded in Melbourne, Canberra, and Hobart following the interest rate hike implemented by the Reserve Bank of Australia in May 2022. As of March 2023, the housing markets in Sydney, Canberra, and Hobart had broadly regained stable conditions, while Melbourne is more gradually returning to its normal state. In addition, over-corrections against fundamentals are evident in the housing markets of Brisbane, Adelaide, Darwin, and Perth. For regular updates on the housing markets, readers may visit the authorsÕ website at www.housing-fever.com.

Suggested Citation

  • Shuping Shi & Peter C. B. Phillips, 2023. "Housing Fever in Australia 2020-2023: Insights from an Econometric Thermometer," Cowles Foundation Discussion Papers 2381, Cowles Foundation for Research in Economics, Yale University.
    • Handle: RePEc:cwl:cwldpp:2381
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    File URL: https://cowles.yale.edu/sites/default/files/2024-02/d2381.pdf
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    References listed on IDEAS

    as
    1. Caballero, Ricardo J. & Krishnamurthy, Arvind, 2006. "Bubbles and capital flow volatility: Causes and risk management," Journal of Monetary Economics, Elsevier, vol. 53(1), pages 35-53, January.
    2. Shuping Shi & Peter C.B. Phillips, 2023. "Diagnosing housing fever with an econometric thermometer," Journal of Economic Surveys, Wiley Blackwell, vol. 37(1), pages 159-186, February.
    3. Hirano, Tomohiro & Inaba, Masaru & Yanagawa, Noriyuki, 2015. "Asset bubbles and bailouts," Journal of Monetary Economics, Elsevier, vol. 76(S), pages 71-89.
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