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Housing price volatility and its determinants

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  • Chyi Lin Lee

Abstract

Purpose - The purpose of this paper is to examine the housing price volatility for eight capital cities in Australia over 1987‐2007. Specifically, the volatility of Australian housing and its determinants were investigated. Design/methodology/approach - An exponential‐generalised autoregressive conditional heteoskedasticity (EGARCH) model was employed to analyse the volatility for eight capital cities in Australia. The Engle LM test was also utilised to examine the volatility clustering effects in these cities. Findings - The volatility clustering effects (ARCH effects) were found in many Australian capital cities. The importance of estimating each individual city's EGARCH model was also demonstrated in which the determinants of housing volatility vary from a city to another city. Asymmetric of the positive and negative shocks were also documented. Research limitations/implications - This study has implications for investors and policy makers in which housing investors should estimate the conditional variance (EGARCH process) of a housing market in respect to the volatility of housing series is not always constant over time. Furthermore, policy makers should also address the importance of considering the sub‐national factors in formulating the national housing policy. The analysis and results are limited by the quality of the data. Originality/value - This paper is one of the few studies in housing volatility. Additionally, it is probably the first attempt to assess the volatility spillover effects in the Australian housing market.

Suggested Citation

  • Chyi Lin Lee, 2009. "Housing price volatility and its determinants," International Journal of Housing Markets and Analysis, Emerald Group Publishing Limited, vol. 2(3), pages 293-308, August.
    • Handle: RePEc:eme:ijhmap:v:2:y:2009:i:3:p:293-308
    DOI: 10.1108/17538270910977572
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    4. Humoud Almutairi & El-Sakka, M.I.T., 2016. "Determinants of Housing Prices in an Oil Based Economy," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 6(5), pages 247-260, May.
    5. Konstantin A. Kholodilin, 2012. "Internet Offer Prices for Flats and Their Determinants: A Cross Section of Large European Cities," Discussion Papers of DIW Berlin 1212, DIW Berlin, German Institute for Economic Research.
    6. Ana Claudia Sant’Anna & Ani L. Katchova, 2020. "Determinants of land value volatility in the U.S. Corn Belt," Applied Economics, Taylor & Francis Journals, vol. 52(37), pages 4058-4072, July.
    7. Christos S. Savva & Nektarios A. Michail, 2017. "Modelling house price volatility states in Cyprus with switching ARCH models," Cyprus Economic Policy Review, University of Cyprus, Economics Research Centre, vol. 11(1), pages 69-82, June.
    8. Gan-Ochir Doojav & Davaasukh Damdinjav, 2021. "Policy-Driven Boom and Bust in the Housing Market: Evidence from Mongolia," Asian Development Review (ADR), World Scientific Publishing Co. Pte. Ltd., vol. 38(02), pages 279-317, September.
    9. Rafiq Ahmed & Syed Tehseen Jawaid & Samina Khalil, 2021. "Bubble Detection in Housing Market: Evidence From a Developing Country," SAGE Open, , vol. 11(2), pages 21582440211, April.
    10. Paraskevi Katsiampa & Kyriaki Begiazi, 2019. "An empirical analysis of the Scottish housing market by property type," Scottish Journal of Political Economy, Scottish Economic Society, vol. 66(4), pages 559-583, September.
    11. Kholodilin, Konstantin A. & Ulbricht, Dirk, 2015. "Urban house prices: A tale of 48 cities," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 9, pages 1-43.
    12. Chyi Lin Lee, 2017. "An examination of the risk-return relation in the Australian housing market," International Journal of Housing Markets and Analysis, Emerald Group Publishing Limited, vol. 10(3), pages 431-449, June.
    13. Valadkhani, Abbas & Costello, Greg & Ratti, Ronald, 2016. "House price cycles in Australia’s four largest capital cities," Economic Analysis and Policy, Elsevier, vol. 52(C), pages 11-22.
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    15. Tomal Mateusz, 2019. "The Impact of Macro Factors on Apartment Prices in Polish Counties: A Two-Stage Quantile Spatial Regression Approach," Real Estate Management and Valuation, Sciendo, vol. 27(4), pages 1-14, December.

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