 Bubbles in the Australian housing marketDirk G. Baur and Richard Heaney Pacific-Basin Finance Journal, 2017, vol. 44, issue C, 113-126 Abstract: This paper analyzes the evolution of Australian property prices, the relationships between cities, houses and units, the stock market and monetary policy. Using monthly house and unit prices for all eight capital cities we identify extended periods of explosive positive price changes followed by comparatively small corrections and no crashes. A comparison with Australian equity prices further reveals that the average risk and return are more favorable in the housing market emphasizing fundamental differences of the two markets such as liquidity and short-sale constraints. We also find evidence for financial contagion from the equity market to the housing market. A Vector Autoregression (VAR) shows that house price changes have a relatively strong effect on cash rate changes and thus monetary policy. The relative stability of Australian property prices over the last 20years suggests that policy makers played a role by providing an accommodating environment. Keywords: Australian housing market; Bubbles; Crashes; Contagion; Diversification (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:44:y:2017:i:c:p:113-126 DOI: 10.1016/j.pacfin.2017.06.001 Access Statistics for this article Pacific-Basin Finance Journal is currently edited by K. Chan and S. Ghon Rhee More articles in Pacific-Basin Finance Journal from Elsevier |
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