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Housing Fever in Australia 2020–23: Insights from an Econometric Thermometer

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  • Shuping Shi
  • Peter C. B. Phillips

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 rise 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 stability, while Melbourne's return to its normal state is more gradual. 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 authors' website at https://www.housing-fever.com.

Suggested Citation

  • Shuping Shi & Peter C. B. Phillips, 2023. "Housing Fever in Australia 2020–23: Insights from an Econometric Thermometer," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 56(3), pages 357-362, September.
    • Handle: RePEc:bla:ausecr:v:56:y:2023:i:3:p:357-362
    DOI: 10.1111/1467-8462.12523
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    1. Case, Karl E. & Quigley, John M. & Shiller, Robert J., 2012. "Comparing Wealth Effects: The Stock Market versus The Housing Market," Department of Economics, Working Paper Series qt6px1d1sc, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
    2. Case Karl E. & Quigley John M. & Shiller Robert J., 2005. "Comparing Wealth Effects: The Stock Market versus the Housing Market," The B.E. Journal of Macroeconomics, De Gruyter, vol. 5(1), pages 1-34, May.
    3. 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.
    4. 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.
    5. 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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