Abstract
Convergences of house prices have been studied for over three decades, but yet have been confirmed because of spatial heterogeneity and autocorrelations in house prices. A spatio-temporal approach was recently proposed to address the spatial and temporal issues related to house prices. However, most previous studies placed the focus on the spatial heterogeneity and autocorrelations from geographical locations, which neglected other spatial factors. In order to overcome this shortfall, this research argued a demographical distance, constructed by demographical structure and housing market scales, to investigate the house price convergences in Australian capital cities. The results confirmed the house price levels in Canberra, Brisbane and Perth converged to the house price level in Sydney.
Highlights
Studies into house price convergences are to investigate the equilibrium of house prices in the long run
The results indicated that the steady states for the house price levels were determined by the regional effects
Generalised impulse response functions based on the demographical spatial model were adopted to simulate the activities of house price levels
Summary
Studies into house price convergences are to investigate the equilibrium of house prices in the long run. A time-series testing method, so-called “unit root test”, has been widely used to investigate the convergence of house price ratios. Cook (2003) proposed an asymmetric unit root test to capture the convergence of house price different ratios. Holmes (2007) proposed an innovative approach to investigate the price ratio convergence by employing the unit root tests within a panel regression framework. This panel unit root model considered the heterogeneity in a steady state as well as in the regional speeds of convergence. The third section illustrates the theories and methodologies of the spatio-temporal model for house price convergence, demographical distance and general impulse response functions.
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