Abstract
PurposeThis study aims to investigate the effect of immigration on housing prices in Australia both at the national and regional levels.Design/methodology/approachData for eight Australian states on a quarterly basis from 2004–2017 is used. To study the possible dynamic and endogenous relationship between housing prices and immigration, a panel vector autoregressive error correction model (PVECM) is adopted.FindingsAnalysis of the results indicates that in the short run immigration positively and significantly affects housing prices, whereas in the long run no significant relationship was observed between the two variables. From the regional breakdown and analysis, it is discerned that in some states there is a significant and positive effect of immigration on residential real estate prices in the long run. Causality analysis confirms that the direction of causation is from immigration to housing prices.Practical implicationsThe study illustrates that immigration and interstate migration, as well as high salaries, have been causing a rise in housing demand and subsequently housing prices. To monitor exceedingly high housing prices, local authorities should be controlling migration and salary levels.Originality/valuePast research studies had highlighted the importance of native interstate migration in explaining the nexus between immigration – housing prices. In this study, it has been empirically verified how immigration has been affecting the locational decisions of natives and subsequently how this has been affecting housing prices.
Highlights
The globalization of the economy is an important aspect that could explain the growth in the level of worldwide migration
From the results given in table 1 below, it is noted that immigration has an insignificant effect on housing prices
Recent studies in other contexts (D’Albis and al., 2019 and Green, 2018) have concluded that immigration does not affect housing prices. This could be explained by the fact that immigration is more a regional phenomenon, with the immigrants having a tendency to cluster in particular regions and the national housing prices might be unaffected
Summary
The globalization of the economy is an important aspect that could explain the growth in the level of worldwide migration. Different factors have contributed to these migration movements, for example political instability/ civil wars in the domestic countries, foreigners seeking better job prospects or a better education system. The native country attracting immigrants is perceived as offering better living conditions. Some countries have been encouraging migration to increase their population size, to lessen their ageing population issue or to attract skilled or cheaper labor. The domestic countries have been formulating and adapting their migration polices as per their needs, for instance in Australia, initially foreigners could mainly apply for permanent visas, and the policies were modified to allow for temporary visa allocations. The countries which have been welcoming the highest number of migrants in 2017 are ranked as follows: the United States, Saudi Arabia, Germany, Russian Federation, United Kingdom, and Australia among others
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