Abstract
A 13‐equation model is developed which captures the essential economic features of the housing industry in Australia. The importance of speculative builders and investors is recognized. Empirical results are presented for two key equations. The asset price of existing dwellings (including land) owned by persons is explained by a portfolio choice or generalized asset adjustment model. This asset price then feeds in as a determinant of new private construction, along with construction costs of new dwellings, financial variables and a measure of demand‐supply imbalance.
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