Modelling housing market fundamentals : empirical evidence from the Sydney housing market

Abstract

Housing prices in Sydney have increased rapidly in recent years. This leads to a debate of whether Sydney housing prices have departed from macroeconomic fundamentals. However, little empirical studies have been devoted to this area. Therefore, the study aims to fill this gap by examining the long run association between housing prices and market fundamentals. In addition, it also examines the long-run determinants of housing prices in Greater Sydney over 1991-2016 by using a Vector Error Correction Model (VECM). The empirical results suggested that Sydney housing prices are cointegrated with market fundamentals in the long run. In addition, this study also found that market fundamentals such as gross disposable income, housing supply, unemployment rate and gross domestic product are the key long-run determinants of housing prices in Greater Sydney. The findings of the study have some profound implications to policy makers and housing investors.

Date of Award	2017
Original language	English