IDEAS home Printed from https://ideas.repec.org/a/spr/jeicoo/v18y2023i1d10.1007_s11403-021-00324-7.html
   My bibliography  Save this article

The impact of social influence in Australian real estate: market forecasting with a spatial agent-based model

Author

Listed:
  • Benjamin Patrick Evans

    (The University of Sydney)

  • Kirill Glavatskiy

    (The University of Sydney)

  • Michael S. Harré

    (The University of Sydney)

  • Mikhail Prokopenko

    (The University of Sydney)

Abstract

Housing markets are inherently spatial, yet many existing models fail to capture this spatial dimension. Here, we introduce a new graph-based approach for incorporating a spatial component in a large-scale urban housing agent-based model (ABM). The model explicitly captures several social and economic factors that influence the agents’ decision-making behaviour (such as fear of missing out, their trend-following aptitude, and the strength of their submarket outreach), and interprets these factors in spatial terms. The proposed model is calibrated and validated with the housing market data for the Greater Sydney region. The ABM simulation results not only include predictions for the overall market, but also produce area-specific forecasting at the level of local government areas within Sydney as arising from individual buy and sell decisions. In addition, the simulation results elucidate agent preferences in submarkets, highlighting differences in agent behaviour, for example, between first-time home buyers and investors, and between both local and overseas investors.

Suggested Citation

  • Benjamin Patrick Evans & Kirill Glavatskiy & Michael S. Harré & Mikhail Prokopenko, 2023. "The impact of social influence in Australian real estate: market forecasting with a spatial agent-based model," Journal of Economic Interaction and Coordination, Springer;Society for Economic Science with Heterogeneous Interacting Agents, vol. 18(1), pages 5-57, January.
    • Handle: RePEc:spr:jeicoo:v:18:y:2023:i:1:d:10.1007_s11403-021-00324-7
    DOI: 10.1007/s11403-021-00324-7
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s11403-021-00324-7
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1007/s11403-021-00324-7?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Dallas Rogers & Chyi Lin Lee & Ding Yan, 2015. "The Politics of Foreign Investment in Australian Housing: Chinese Investors, Translocal Sales Agents and Local Resistance," Housing Studies, Taylor & Francis Journals, vol. 30(5), pages 730-748, July.
    2. Conrad Power, 2009. "A Spatial Agent-Based Model of N-Person Prisoner's Dilemma Cooperation in a Socio-Geographic Community," Journal of Artificial Societies and Social Simulation, Journal of Artificial Societies and Social Simulation, vol. 12(1), pages 1-8.
    3. W. Miles, 2008. "Boom–Bust Cycles and the Forecasting Performance of Linear and Non-Linear Models of House Prices," The Journal of Real Estate Finance and Economics, Springer, vol. 36(3), pages 249-264, April.
    4. Bahadir, Berrak & Mykhaylova, Olena, 2014. "Housing market dynamics with delays in the construction sector," Journal of Housing Economics, Elsevier, vol. 26(C), pages 94-108.
    5. Craig Burnside & Martin Eichenbaum & Sergio Rebelo, 2016. "Understanding Booms and Busts in Housing Markets," Journal of Political Economy, University of Chicago Press, vol. 124(4), pages 1088-1147.
    6. John Mc Breen & Florence Goffette-Nagot & Pablo Jensen, 2010. "Information and Search on the Housing Market: An Agent-Based Model," Post-Print halshs-00945969, HAL.
    7. John Geanakoplos & Robert Axtell & J. Doyne Farmer & Peter Howitt & Benjamin Conlee & Jonathan Goldstein & Matthew Hendrey & Nathan M. Palmer & Chun-Yi Yang, 2012. "Getting at Systemic Risk via an Agent-Based Model of the Housing Market," American Economic Review, American Economic Association, vol. 102(3), pages 53-58, May.
    8. John Mc Breen & Florence Goffette-Nagot & Pablo Jensen, 2010. "Information and Search on the Housing Market: An Agent-Based Model," Lecture Notes in Economics and Mathematical Systems, in: Marco Li Calzi & Lucia Milone & Paolo Pellizzari (ed.), Progress in Artificial Economics, pages 153-164, Springer.
    9. Piazzesi, Monika & Schneider, Martin & Tuzel, Selale, 2007. "Housing, consumption and asset pricing," Journal of Financial Economics, Elsevier, vol. 83(3), pages 531-569, March.
    10. John Mc Breen & Florence Goffette-Nagot & Pablo Jensen, 2010. "Information and Search on the Housing Market: An agent-based Model," Post-Print halshs-00587528, HAL.
    11. J. Raimbault & J. Broere & M. Somveille & J. M. Serna & E. Strombom & C. Moore & B. Zhu & L. Sugar, 2020. "A spatial agent based model for simulating and optimizing networked eco-industrial systems," Papers 2003.14133, arXiv.org.
    12. Emanuele Crosato & Ramil Nigmatullin & Mikhail Prokopenko, 2018. "On critical dynamics and thermodynamic efficiency of urban transformations," Papers 1806.03758, arXiv.org.
    13. Tesfatsion, Leigh S., 2002. "Agent-Based Computational Economics: Growing Economies from the Bottom Up," Staff General Research Papers Archive 5075, Iowa State University, Department of Economics.
    14. Pangallo, Marco & Nadal, Jean-Pierre & Vignes, Annick, 2019. "Residential income segregation: A behavioral model of the housing market," Journal of Economic Behavior & Organization, Elsevier, vol. 159(C), pages 15-35.
    15. Ing-Haw Cheng & Sahil Raina & Wei Xiong, 2014. "Wall Street and the Housing Bubble," American Economic Review, American Economic Association, vol. 104(9), pages 2797-2829, September.
    16. John Mc Breen & Florence Goffette-Nagot & Pablo Jensen, 2010. "Information and Search on the Housing Market: An agent-based Model," Post-Print halshs-00587707, HAL.
    17. Kouwenberg, Roy & Zwinkels, Remco, 2014. "Forecasting the US housing market," International Journal of Forecasting, Elsevier, vol. 30(3), pages 415-425.
    18. Herbert A. Simon, 1955. "A Behavioral Model of Rational Choice," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 69(1), pages 99-118.
    19. Todd Sinai, 2012. "House Price Moments in Boom-Bust Cycles," NBER Chapters, in: Housing and the Financial Crisis, pages 19-68, National Bureau of Economic Research, Inc.
    20. Frías-Paredes, Laura & Mallor, Fermín & León, Teresa & Gastón-Romeo, Martín, 2016. "Introducing the Temporal Distortion Index to perform a bidimensional analysis of renewable energy forecast," Energy, Elsevier, vol. 94(C), pages 180-194.
    21. Roy Kouwenberg & Remco C J Zwinkels, 2015. "Endogenous Price Bubbles in a Multi-Agent System of the Housing Market," PLOS ONE, Public Library of Science, vol. 10(6), pages 1-10, June.
    22. John Conlisk, 1996. "Why Bounded Rationality?," Journal of Economic Literature, American Economic Association, vol. 34(2), pages 669-700, June.
    23. Maurice Gauder & Claire Houssard & David Orsmond, 2014. "Foreign Investment in Residential Real Estate," RBA Bulletin (Print copy discontinued), Reserve Bank of Australia, pages 11-18, June.
    24. Ross Guest & Nicholas Rohde, 2017. "The Contribution of Foreign Real Estate Investment to Housing Price Growth in Australian Capital Cities," Abacus, Accounting Foundation, University of Sydney, vol. 53(3), pages 304-318, September.
    25. Shang-Jin Wei & Xiaobo Zhang & Yin Liu, 2012. "Status Competition and Housing Prices," NBER Working Papers 18000, National Bureau of Economic Research, Inc.
    26. Filippo Simini & Marta C. González & Amos Maritan & Albert-László Barabási, 2012. "A universal model for mobility and migration patterns," Nature, Nature, vol. 484(7392), pages 96-100, April.
    27. Shimizu Chihiro & Nishimura Kiyohiko G. & Watanabe Tsutomu, 2010. "Housing Prices in Tokyo: A Comparison of Hedonic and Repeat Sales Measures," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 230(6), pages 792-813, December.
    28. Kirill S. Glavatskiy & Mikhail Prokopenko & Adrian Carro & Paul Ormerod & Michael Harre, 2020. "Explaining herding and volatility in the cyclical price dynamics of urban housing markets using a large scale agent-based model," Papers 2004.07571, arXiv.org.
    29. Blake LeBaron & Leigh Tesfatsion, 2008. "Modeling Macroeconomies as Open-Ended Dynamic Systems of Interacting Agents," American Economic Review, American Economic Association, vol. 98(2), pages 246-250, May.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Marco Bardoscia & Adrian Carro & Marc Hinterschweiger & Mauro Napoletano & Lilit Popoyan & Andrea Roventini & Arzu Uluc, 2024. "The impact of prudential regulations on the UK housing market and economy: Insights from an agent-based model," Working Papers 118, Queen Mary, University of London, School of Business and Management, Centre for Globalisation Research.
    2. Richard Bläse & Matthias Filser & Sascha Kraus & Kaisu Puumalainen & Petra Moog, 2024. "Non‐sustainable buying behavior: How the fear of missing out drives purchase intentions in the fast fashion industry," Business Strategy and the Environment, Wiley Blackwell, vol. 33(2), pages 626-641, February.
    3. Carro, Adrian, 2023. "Taming the housing roller coaster: The impact of macroprudential policy on the house price cycle," Journal of Economic Dynamics and Control, Elsevier, vol. 156(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Bolt, Wilko & Demertzis, Maria & Diks, Cees & Hommes, Cars & Leij, Marco van der, 2019. "Identifying booms and busts in house prices under heterogeneous expectations," Journal of Economic Dynamics and Control, Elsevier, vol. 103(C), pages 234-259.
    2. Kirill S. Glavatskiy & Mikhail Prokopenko & Adrian Carro & Paul Ormerod & Michael Harré, 2021. "Explaining herding and volatility in the cyclical price dynamics of urban housing markets using a large-scale agent-based model," SN Business & Economics, Springer, vol. 1(6), pages 1-21, June.
    3. Bolt, Wilko & Demertzis, Maria & Diks, Cees & Hommes, Cars & Leij, Marco van der, 2019. "Identifying booms and busts in house prices under heterogeneous expectations," Journal of Economic Dynamics and Control, Elsevier, vol. 103(C), pages 234-259.
    4. Dutta, Champa Bati & Das, Debasish Kumar, 2017. "What drives consumers' online information search behavior? Evidence from England," Journal of Retailing and Consumer Services, Elsevier, vol. 35(C), pages 36-45.
    5. Roberto Dieci & Xue-Zhong He, 2018. "Heterogeneous Agent Models in Finance," Research Paper Series 389, Quantitative Finance Research Centre, University of Technology, Sydney.
    6. Carlos Garriga & Aaron Hedlund, 2019. "Crises in the Housing Market: Causes, Consequences, and Policy Lessons," Working Papers 2019-33, Federal Reserve Bank of St. Louis.
    7. Greg Kaplan & Kurt Mitman & Giovanni L. Violante, 2020. "The Housing Boom and Bust: Model Meets Evidence," Journal of Political Economy, University of Chicago Press, vol. 128(9), pages 3285-3345.
    8. Dieci, Roberto & Westerhoff, Frank, 2016. "Heterogeneous expectations, boom-bust housing cycles, and supply conditions: A nonlinear economic dynamics approach," Journal of Economic Dynamics and Control, Elsevier, vol. 71(C), pages 21-44.
    9. Kukacka, Jiri & Barunik, Jozef, 2017. "Estimation of financial agent-based models with simulated maximum likelihood," Journal of Economic Dynamics and Control, Elsevier, vol. 85(C), pages 21-45.
    10. Dieci, Roberto & Westerhoff, Frank, 2015. "Heterogeneous expectations, boom-bust housing cycles, and supply conditions: A nonlinear dynamics approach," BERG Working Paper Series 99, Bamberg University, Bamberg Economic Research Group.
    11. Gualdi, Stanislao & Tarzia, Marco & Zamponi, Francesco & Bouchaud, Jean-Philippe, 2015. "Tipping points in macroeconomic agent-based models," Journal of Economic Dynamics and Control, Elsevier, vol. 50(C), pages 29-61.
    12. Martin, Carolin & Schmitt, Noemi & Westerhoff, Frank, 2022. "Housing Markets, Expectation Formation And Interest Rates," Macroeconomic Dynamics, Cambridge University Press, vol. 26(2), pages 491-532, March.
    13. Martin, Carolin & Schmitt, Noemi & Westerhoff, Frank, 2021. "Heterogeneous expectations, housing bubbles and tax policy," Journal of Economic Behavior & Organization, Elsevier, vol. 183(C), pages 555-573.
    14. Alqaralleh, Huthaifa & Canepa, Alessandra, 2020. "Housing market cycles in large urban areas," Economic Modelling, Elsevier, vol. 92(C), pages 257-267.
    15. Roy Kouwenberg & Remco C J Zwinkels, 2015. "Endogenous Price Bubbles in a Multi-Agent System of the Housing Market," PLOS ONE, Public Library of Science, vol. 10(6), pages 1-10, June.
    16. Narayan Bulusu & Jefferson Duarte & Carles Vergara-Alert, 2013. "Booms and Busts in House Prices Explained by Constraints in Housing Supply," Staff Working Papers 13-18, Bank of Canada.
    17. Giovanni Dosi & Andrea Roventini, 2024. "Evolutionary Growth Theory," LEM Papers Series 2024/02, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    18. Emiliano Brancaccio & Mauro Gallegati & Raffaele Giammetti, 2022. "Neoclassical influences in agent‐based literature: A systematic review," Journal of Economic Surveys, Wiley Blackwell, vol. 36(2), pages 350-385, April.
    19. Benjamin Patrick Evans & Kirill Glavatskiy & Michael S. Harr'e & Mikhail Prokopenko, 2020. "The impact of social influence in Australian real-estate: market forecasting with a spatial agent-based model," Papers 2009.06914, arXiv.org, revised Feb 2021.
    20. Popoyan, Lilit & Napoletano, Mauro & Roventini, Andrea, 2017. "Taming macroeconomic instability: Monetary and macro-prudential policy interactions in an agent-based model," Journal of Economic Behavior & Organization, Elsevier, vol. 134(C), pages 117-140.

    More about this item

    Keywords

    Agent-based modelling; Spatial models; Housing markets; Decision-making; Social influence; Trend following;
    All these keywords.

    JEL classification:

    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets
    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:jeicoo:v:18:y:2023:i:1:d:10.1007_s11403-021-00324-7. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.