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Housing Supply Elasticity in Sydney Local Government Areas

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  • Xiangling Liu

    ()
    (School of Economics, Australian School of Business, the University of New South Wales)

  • Glenn Otto

    ()
    (School of Economics, Australian School of Business, the University of New South Wales)

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    Abstract

    We report supply elasticity estimates of residential property (houses and apartments) for Local Government Areas (LGAs) in metropolitan Sydney. Using annual data for 1991-2012, the average supply elasticity estimate across all LGAs is 0.2 for houses and 0.8 for apartments. The supply ofhouses is inelastic in all 43 LGAs; in contrast apartment supply is elastic – greater than unity – in about one-third of LGAs. We develop a model to explain the cross-section variation in supply elasticity across LGAs. For houses, supply elasticity is negatively related to an LGA’s population density, the time taken by a Local Council to process a development application and to various measures of the amount of land in an LGA that is unavailable for new housing development. Variation in supply elasticity for apartments across LGAs is unrelated to any of the available regressors.

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    File URL: http://research.economics.unsw.edu.au/RePEc/papers/2014-13.pdf
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    Bibliographic Info

    Paper provided by School of Economics, The University of New South Wales in its series Discussion Papers with number 2014-13.

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    Length: 31 pages
    Date of creation: Mar 2014
    Date of revision:
    Handle: RePEc:swe:wpaper:2014-13

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    Keywords: housing supply; supply elasticity; development application; undevelopable land;

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    References

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    1. Emily Gitelman & Glenn Otto, 2012. "Supply Elasticity Estimates for the Sydney Housing Market," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 45(2), pages 176-190, 06.
    2. James H. Stock & Motohiro Yogo, 2002. "Testing for Weak Instruments in Linear IV Regression," NBER Technical Working Papers 0284, National Bureau of Economic Research, Inc.
    3. Mariano Kulish & Anthony Richards & Christian Gillitzer, 2012. "Urban Structure and Housing Prices: Some Evidence from Australian Cities," The Economic Record, The Economic Society of Australia, vol. 88(282), pages 303-322, 09.
    4. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-38, May.
    5. Newey, Whitney K & West, Kenneth D, 1987. "A Simple, Positive Semi-definite, Heteroskedasticity and Autocorrelation Consistent Covariance Matrix," Econometrica, Econometric Society, vol. 55(3), pages 703-08, May.
    6. Albert Saiz, 2010. "The Geographic Determinants of Housing Supply," The Quarterly Journal of Economics, MIT Press, vol. 125(3), pages 1253-1296, August.
    7. Ball, Michael & Meen, Geoffrey & Nygaard, Christian, 2010. "Housing supply price elasticities revisited: Evidence from international, national, local and company data," Journal of Housing Economics, Elsevier, vol. 19(4), pages 255-268, December.
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