Self-exciting effects of house prices on unit prices in Australian capital cities

Abbas Valadkhani, Russell Smyth

Research output: Contribution to journalArticleResearchpeer-review

11 Citations (Scopus)

Abstract

This paper examines the long- and short-run relationship between Australian house and unit prices across all capital cities over the period December 1995 to June 2015. We find that house and unit prices are cointegrated and, based on the results of Granger causality and generalised impulse responses, that house prices significantly influence unit prices across all cities. However, bi-directional causality (responses) exists only for major capital cities with the exception of Brisbane. We also, for the first time, apply self-excited threshold models to explore the complex interplay between house and unit prices in Australia. We find that when the market for units is self-excited, or bullish, the positive effects of house prices on unit prices are noticeably larger than otherwise. There is a varying degree of herd mentality in the Australian property market with Sydney and Darwin being the most and least ‘excitable’ capital cities, respectively.

Original languageEnglish
Pages (from-to)2376-2394
Number of pages19
JournalUrban Studies
Volume54
Issue number10
DOIs
Publication statusPublished - 1 Aug 2017

Keywords

  • Australia
  • cointegration
  • house prices
  • self-exciting threshold model
  • unit prices

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