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Measuring a Boom and Bust: The Sydney Housing Market 2001-2006

Author

Listed:
  • Robert J. Hill

    () (School of Economics, University of New South Wales)

  • Daniel Melser

    () (Department of Economics, Monash University)

  • Iqbal Syed

    () (School of Economics, University of New South Wales)

Abstract

The Sydney housing market peaked in 2003. The period 2001-2006 is, therefore, of particular interest since it captures a boom and bust in the housing market. We compute hedonic, repeat-sales and median price indexes for five regions in Sydney over this period. While the three approaches are in broad agreement regarding the timing of the turning point in the housing market, some important differences also emerge. In particular, we find evidence of sample selection bias in our hedonic and repeat-sales data sets, which in turn seems to generate bias (although in opposite directions) in our hedonic and repeat-sales indexes. The median indexes also may be biased as a result of an apparent decline in the average quality of houses sold in the latter part of the sample. Although in this case the repeat-sales indexes seem to generate the most reliable results, we nevertheless in general favor the hedonic approach. We also find evidence of convergence in prices across regions during the boom and divergence in the subsequent bust.

Suggested Citation

  • Robert J. Hill & Daniel Melser & Iqbal Syed, 2009. "Measuring a Boom and Bust: The Sydney Housing Market 2001-2006," Discussion Papers 2009-08, School of Economics, The University of New South Wales.
  • Handle: RePEc:swe:wpaper:2009-08
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    File URL: http://research.economics.unsw.edu.au/RePEc/papers/2009-08.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    House prices; Price index; Hedonic regression; Repeat-Sales index; Sample selection bias; Convergence;

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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