House price diffusion of housing submarkets in Greater Sydney

Despite numerous studies investigating house price diffusion between regional cities, few have considered a spillover effect among housing submarkets within a metropolitan city. This study expands upon the limited literature to examine house price diffusion of housing submarkets (namely, low-priced...

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Bibliographic Details
Published in:Housing studies 2020-07, Vol.35 (6), p.1110-1141
Main Authors: Bangura, Mustapha, Lee, Chyi Lin
Format: Article
Language:English
Subjects:
Causality
cointegration
Cointegration analysis
Convergence
Diffusion
filtering process
Granger causality
Greater Sydney
house price diffusion
Housing
Housing market
housing policy
Housing prices
housing submarkets
Investors
Policy making
Prices
Spillover effect
Submarkets
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Summary:Despite numerous studies investigating house price diffusion between regional cities, few have considered a spillover effect among housing submarkets within a metropolitan city. This study expands upon the limited literature to examine house price diffusion of housing submarkets (namely, low-priced and high-priced submarkets) in Greater Sydney, one of the most diverse housing markets in Australia, using convergence tests, cointegration techniques, Granger causality and dynamic ordinary least square cointegration tests. The results show that a long-run relationship in house prices exists between these two submarkets in Greater Sydney. Importantly, the empirical results show that a large degree of diffusion takes place from the less prosperous submarket to the high-end submarket. This supports the equity transfer hypothesis via a filtering process in which house prices in the low-priced submarket will be transmitted into the high-priced submarket. The study also finds that the low-priced submarket is the primary reactor to changes in economic fundamentals. These findings have some profound implications for policy-makers and housing investors.
ISSN:0267-3037
1466-1810
DOI:10.1080/02673037.2019.1648772