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The Apartment Shortage

Author

Listed:
  • Keaton Jenner

    (Reserve Bank of Australia)

  • Peter Tulip

    (Reserve Bank of Australia)

Abstract

This paper measures the excess demand for apartments in Australia's largest cities. We estimate that home buyers will pay an average of $873,000 for a new apartment in Sydney though it only costs $519,000 to supply, a gap of $355,000 (68 per cent of costs). There are smaller gaps of $97,000 (20 per cent of costs) in Melbourne and $10,000 (2 per cent of costs) in Brisbane. The large gaps are sustained by planning restrictions. The shortage of apartments is most severe in the inner suburbs of Sydney, where height limits prevent more construction. Elsewhere, restrictions on converting low-density housing to apartments are important. High-rise apartments are a much less costly means of supplying extra housing than the medium-density housing that some planners favour.

Suggested Citation

  • Keaton Jenner & Peter Tulip, 2020. "The Apartment Shortage," RBA Research Discussion Papers rdp2020-04, Reserve Bank of Australia.
  • Handle: RePEc:rba:rbardp:rdp2020-04
    as

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    File URL: https://www.rba.gov.au/publications/rdp/2020/pdf/rdp2020-04.pdf
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    References listed on IDEAS

    as
    1. Ross Kendall & Peter Tulip, 2018. "The Effect of Zoning on Housing Prices," RBA Research Discussion Papers rdp2018-03, Reserve Bank of Australia.
    2. Paul C. Cheshire & Christian A.L. Hilber, 2008. "Office Space Supply Restrictions in Britain: The Political Economy of Market Revenge," Economic Journal, Royal Economic Society, vol. 118(529), pages 185-221, June.
    3. Ahlfeldt, Gabriel M. & Pietrostefani, Elisabetta, 2019. "The economic effects of density: A synthesis," Journal of Urban Economics, Elsevier, vol. 111(C), pages 93-107.
    4. Ryan Fox & Peter Tulip, 2014. "Is Housing Overvalued?," RBA Research Discussion Papers rdp2014-06, Reserve Bank of Australia.
    5. Kirdan Lees, 2019. "Quantifying the costs of land use regulation: evidence from New Zealand," New Zealand Economic Papers, Taylor & Francis Journals, vol. 53(3), pages 245-269, September.
    6. Glaeser, Edward L & Gyourko, Joseph & Saks, Raven, 2005. "Why Is Manhattan So Expensive? Regulation and the Rise in Housing Prices," Journal of Law and Economics, University of Chicago Press, vol. 48(2), pages 331-369, October.
    7. 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, September.
    8. Arnott, Richard J. & MacKinnon, James G., 1977. "Measuring the costs of height restrictions with a general equilibrium model," Regional Science and Urban Economics, Elsevier, vol. 7(4), pages 359-375, November.
    9. Cameron K. Murray, 2016. "Land value uplift from light rail," Discussion Papers Series 566, School of Economics, University of Queensland, Australia.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    housing prices; apartments; zoning; land use;

    JEL classification:

    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets
    • R38 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Government Policy
    • R52 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Land Use and Other Regulations

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