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Australian Housing Market Booms: Fundamentals or Speculation?☆

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  • Shuping Shi
  • Arafat Rahman
  • Ben Zhe Wang

Abstract

This paper investigates the presence of housing bubbles in Australia at the national, capital city and local government area (LGA) levels. We control for housing market demand and supply fundamentals using the technique of Shi (2017), and employ the recursive evolving method proposed by Phillips et al. (2015a,b) for the detection of explosive bubbles. While the national‐level analysis suggests a short‐lived bubble episode (2017Q3) over the entire sample period from 1999 to 2017, the results from the capital‐city‐level data reveal substantial heterogeneity across cities, with only short‐lived and isolated bubbles identified for Sydney and Melbourne during the recent rapid housing price expansions from 2013 to 2017. The LGA‐level analysis suggests that only a small percentage of LGA housing markets are identified to be speculative in Sydney and Melbourne from 2013 to 2017.

Suggested Citation

  • 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.
    • Handle: RePEc:bla:ecorec:v:96:y:2020:i:315:p:381-401
    DOI: 10.1111/1475-4932.12553
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    Cited by:

    1. Wang, Wen-Kai & Lin, Che-Chun & Tsai, I-Chun, 2022. "Long- and short-term price behaviors in presale housing markets in Taiwan," Economic Analysis and Policy, Elsevier, vol. 74(C), pages 350-364.
    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. Vicente Esteve & María A. Prats, 2021. "Testing for rational bubbles in Australian housing market from a long-term perspective," Working Papers 2113, Department of Applied Economics II, Universidad de Valencia.
    4. 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.
    5. Esteve Vicente & Prats Maria A., 2021. "Structural Breaks and Explosive Behavior in the Long-Run: The Case of Australian Real House Prices, 1870–2020," Economics - The Open-Access, Open-Assessment Journal, De Gruyter, vol. 15(1), pages 72-84, January.
    6. Konstantin A. Kholodilin & Sebastian Kohl & Florian Müller, 2023. "Government-Made House Price Bubbles? Austerity, Homeownership, Rental, and Credit Liberalization Policies and the “Irrational Exuberance” on Housing Markets," Discussion Papers of DIW Berlin 2061, DIW Berlin, German Institute for Economic Research.
    7. Shuping Shi & Peter C. B. Phillips, 2022. "Econometric Analysis of Asset Price Bubbles," Cowles Foundation Discussion Papers 2331, Cowles Foundation for Research in Economics, Yale University.
    8. Hurn, Stan & Shi, Shuping & Wang, Ben, 2022. "Housing networks and driving forces," Journal of Banking & Finance, Elsevier, vol. 134(C).

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