Two Countries, Sixteen Cities, Five Thousand Kilometres: How Many Housing Markets?

Ryan Greenaway-McGrevy, Arthur Grimes and Mark Holmes ()

No 16_04, Working Papers from Motu Economic and Public Policy Research

Abstract: We test whether a single housing market exists across sixteen cities covering two countries, Australia and New Zealand. Distances between these cities are vastly greater than commuting distances. We define a single housing market as one in which a single stochastic trend describes the long run path of real house prices in all cities. A strong form single housing market occurs when an innovation to the stochastic trend affects house prices across all cities multiplicatively to an equal degree. A weak form occurs when an innovation to the stochastic trend affects house prices in all cities, but not to an equal degree. We find that the sixteen housing markets are characterised by a weak form single housing market. The dynamic structure of adjustment reveals three groups of cities. House price shocks are first reflected in the price dynamics of a leading group of Australian cities (including Melbourne and Sydney), then flow to a group of follower cities comprising peripheral Australian and major New Zealand cities, and then to a group of laggard cities within New Zealand. Our theoretical model demonstrates how a weak form single housing market may arise due to differences between cities in house price responses to land prices, migration responses to house prices and/or land price responses to migration flows.

Keywords: House prices; convergence; single housing market; Australia; New Zealand (search for similar items in EconPapers)
JEL-codes: R21 R31 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2016-03
New Economics Papers: this item is included in nep-geo and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://motu-www.motu.org.nz/wpapers/16_04.pdf

Related works:
Journal Article: Two countries, sixteen cities, five thousand kilometres: How many housing markets? (2019)
Working Paper: Two countries, sixteen cities, five thousand kilometres: How many housing markets? (2016)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:mtu:wpaper:16_04

Access Statistics for this paper

More papers in Working Papers from Motu Economic and Public Policy Research Contact information at EDIRC.
Bibliographic data for series maintained by Maxine Watene ().