A Model of the Australian Housing Market

Trent Saunders and Peter Tulip

The Economic Record, 2020, vol. 96, issue S1, 1-25

Abstract: We build an empirical model of the Australian housing market that quantifies interrelationships between construction, vacancies, rents and prices. We find that low interest rates (partly reflecting lower world long‐term rates) explain much of the rapid growth in housing prices and construction over the past few years. Another demand factor, high immigration, also helps explain the tight housing market and rapid growth in rents in the late 2000s. A large part of the effect of interest rates on dwelling investment, and hence GDP, works through housing prices.

Date: 2020
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https://doi.org/10.1111/1475-4932.12537

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