Big City Difference? Another Look at Factors Driving House Prices

Authors: Wilson, Patrick¹; Zurbruegg, Ralf²

Source: Journal of Property Research, Volume 25, Number 2, June 2008 , pp. 157-177(21)

Publisher: Routledge, part of the Taylor & Francis Group

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Abstract:

The purpose of this paper is to re-examine the issue of whether inter-urban housing markets can be modelled using a set of common economic fundamentals (such as economic growth, employment and the like). This is a timely analysis in view of the current widespread interest in housing markets as a result of the fall-out from the housing sub-prime crisis in the United States. House prices and economic fundamentals within each city are tested for cointegration and, in the event of a cointegrating relationship being found, restriction tests are applied to ascertain whether particular economic fundamentals can be excluded from the long-run equilibrium house price model for that city, and whether the given fundamental contributes to speed of adjustment back to equilibrium once a disturbance has taken place. This allows a test of whether the given factor/s can be considered a long-run driver/s of house prices in each city. The main finding is that there are clear differences across Australian state capitals in long-run driving factors for house prices.

Keywords: House price drivers; economic fundamentals; cointegration; restriction tests

Document Type: Research article

DOI: http://dx.doi.org/10.1080/09599910802607810

Affiliations: 1: School of Finance and Economics, University of Technology, Sydney, Australia 2: Faculty of Business, University of Adelaide, Australia

Publication date: 2008-06-01

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