What Drives House Prices in Australia? A+L4584 Cross-Country Approach
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Summary:
This paper analyzes the factors driving house prices in Australia from a cross-country perspective using several approaches. It uses a cointegration technique to estimate the long-run equilibrium house prices in Australia, New Zealand, and Canada and assesses the extent of a possible disequilibrium. It also presents an event analysis to shed some light on the link between house prices, capital inflows and the terms of trade. The econometric analysis suggests an overvaluation of 5-10 percent depending on the model specification. Event analysis indicates that terms of trade shocks were associated with larger increases in house prices in Australia, than in the case of strong capital inflow episodes.
Series:
Working Paper No. 2010/291
Subject:
Asset prices Balance of payments Capital inflows Housing Housing prices International trade National accounts Prices Terms of trade
English
Publication Date:
December 1, 2010
ISBN/ISSN:
9781455211722/1018-5941
Stock No:
WPIEA2010291
Pages:
24
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