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City Sizes, Housing Costs, and Wealth

Author

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  • Luci Ellis

    (Reserve Bank of Australia)

  • Dan Andrews

    (Reserve Bank of Australia)

Abstract

Australia’s household sector appears to hold a greater proportion of its wealth in dwellings than do households in other countries. Average dwelling prices in Australia also appear to be high relative to household income, but dwellings in Australia are not noticeably higher in quality than those in comparable countries. This concentration of wealth in housing also does not seem attributable to government policies that encourage dwelling investment in Australia to a greater extent than is true overseas. A possible reconciliation of this pattern may be the unusual concentration of Australia’s population in two large cities. Average housing prices tend to be higher in larger cities than smaller ones. Therefore, the expensive cities in Australia drag up the average level of dwelling prices more than in other countries, resulting in a higher share of wealth concentrated in housing. The increasing importance of dwelling wealth in Australia over recent years largely reflects the consequences of disinflation and financial deregulation. This is most likely a transitional effect, and the ratio of dwelling wealth to income should stabilise, or begin to grow more slowly, in the future.

Suggested Citation

  • Luci Ellis & Dan Andrews, 2001. "City Sizes, Housing Costs, and Wealth," RBA Research Discussion Papers rdp2001-08, Reserve Bank of Australia.
  • Handle: RePEc:rba:rbardp:rdp2001-08
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    File URL: http://www.rba.gov.au/publications/rdp/2001/pdf/rdp2001-08.pdf
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. David M. Williams, 2009. "House prices and financial liberalisation in Australia," Economics Series Working Papers 432, University of Oxford, Department of Economics.
    2. Mitchell, Olivia S. & Piggott, John, 2004. "Unlocking housing equity in Japan," Journal of the Japanese and International Economies, Elsevier, vol. 18(4), pages 466-505, December.
    3. repec:asg:wpaper:1011 is not listed on IDEAS
    4. Luci Ellis, 2006. "Housing and Housing Finance: The View from Australia and Beyond," RBA Research Discussion Papers rdp2006-12, Reserve Bank of Australia.
    5. Judith Yates, 2003. "'The more things change?' An overview of Australia's recent home ownership policies," International Journal of Housing Policy, Taylor & Francis Journals, vol. 3(1), pages 1-33.
    6. Shengzu Wang & Patrizia Tumbarello, 2010. "What Drives House Prices in Australia? A+L4584 Cross-Country Approach," IMF Working Papers 10/291, International Monetary Fund.
    7. Bruce Bradbury, 2008. "Housing wealth as retirement saving: Does the Australian Model Lead to Over-Consumption of Housing?," LWS Working papers 7, LIS Cross-National Data Center in Luxembourg.
    8. Marion Kohler & Kylie Smith, 2005. "Housing and the Household Wealth Portfolio: The Role of Location," RBA Research Discussion Papers rdp2005-10, Reserve Bank of Australia.
    9. Dan Andrews, 2010. "Real House Prices in OECD Countries: The Role of Demand Shocks and Structural and Policy Factors," OECD Economics Department Working Papers 831, OECD Publishing.
    10. Luci Ellis & Laura Berger-Thomson, 2004. "Housing Construction Cycles and Interest Rates," Econometric Society 2004 Australasian Meetings 335, Econometric Society.
    11. Marion Kohler & Michelle Van Der Merwe, 2015. "Long-run Trends in Housing Price Growth," RBA Bulletin, Reserve Bank of Australia, pages 21-30, September.
    12. Daniel ARRIBAS-BEL & Fernando SANZ GRACIA & Domingo P. XIMENEZ-DE-EMBUN, 2012. "Kangaroos, Cities And Space: A First Approach To The Australian Urban System," Region et Developpement, Region et Developpement, LEAD, Universite du Sud - Toulon Var, vol. 36, pages 165-187.
    13. Ellis Connolly & Marion Kohler, 2004. "The Impact of Superannuation on Household Saving," RBA Research Discussion Papers rdp2004-01, Reserve Bank of Australia.
    14. Luci Ellis, 2005. "Disinflation and the dynamics of mortgage debt," BIS Papers chapters,in: Bank for International Settlements (ed.), Investigating the relationship between the financial and real economy, volume 22, pages 5-20 Bank for International Settlements.
    15. Chris Stewart & Benn Robertson & Alexandra Heath, 2013. "Trends in the Funding and Lending Behaviour of Australian Banks," RBA Research Discussion Papers rdp2013-15, Reserve Bank of Australia.

    More about this item

    Keywords

    dwelling prices; rank-size rule; Zipf’s Law;

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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