Australia's growth in households and house prices
Crawford School Research Papers from Crawford School of Public Policy, The Australian National University
Real house prices r ise in Australia amid growing concern of an impending correction. This paper explains why the household formation rate has risen with strong population growth due to higher net immigration and average household size levelling due to population ageing. An intertemporal model is developed to analyse the effect of an increase in the household formation rate on the housing market. We find that real house prices rise over time if the rate of household formation outstrips the rate of housing supply. Under forward looking expectations, a rising household formation rate could explain rising real house prices relative to the present discounted value of future wages. The results explain why real house prices may exhibit an upward trend despite population ageing and how government planning could have an impact.
Keywords: Australia; Households; House Prices (search for similar items in EconPapers)
Pages: 21 pages
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Journal Article: Australia's Growth in Households and House Prices (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:een:crwfrp:1803
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