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How does real estate market react to the iron ore boom in Australian capital cities?

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  • Zheng Zheng Li

    (Qingdao University)

  • Chi-Wei Su

    (Qingdao University)

Abstract

This study concentrates on the dynamic response of housing markets to the changes in iron ore price by using the quantile-on-quantile regression method. Because iron ore production is highly geographically concentrated, we provide a more precise empirical analysis at the regional level. The results indicate that the iron ore price in most quantiles has a positive effect on the housing price in Perth because it benefits from the mining boom. However, once iron ore is exhausted, the real estate market will fail to drive the whole economy. The negative relationships between iron ore price in low quantiles and housing price are found in Adelaide and Hobart. In other regions, such as Sydney, Melbourne, Canberra and Darwin, housing prices are positively affected by iron ore prices in low quantiles and turn to negative in relative higher quantiles. This difference is attributed to resource endowment and labor mobility, as well as local policy orientation. Furthermore, the robustness test proves the credibility of the results when considering the endogeneity issue. The findings may deliver the reference that better management of real estate markets throughout a resource cycle, particularly in light of the mining industry with greater geopolitical shocks, could result in better socioeconomic outcomes for Australia.

Suggested Citation

  • Zheng Zheng Li & Chi-Wei Su, 2023. "How does real estate market react to the iron ore boom in Australian capital cities?," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 71(2), pages 517-537, October.
    • Handle: RePEc:spr:anresc:v:71:y:2023:i:2:d:10.1007_s00168-022-01179-x
    DOI: 10.1007/s00168-022-01179-x
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    More about this item

    Keywords

    C22; O13; Q33; R31;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • Q33 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Resource Booms (Dutch Disease)
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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