The determinants of homeownership affordability in Greater Sydney: evidence from a submarket analysis

Abstract

Recognising the existence of socio-economic and demographic disparities across metropolitan cities such as Greater Sydney, this study gauges the determinants of homeownership affordability in the different regions of Greater Sydney using local government area (LGA) data over 1991–2016 with a system generalised method of moments (GMM) and a panel error correction model (ECM). The results of the study showed that the determinants of homeownership affordability vary across the regions of Greater Sydney. Although house price and median personal income are the key drivers of homeownership affordability across all regions, the difference in the magnitude of these determinants between regions have also been documented. Specifically, Western Sydney is more sensitive to income and house price change than the other regions. In addition, Western Sydney is also sensitive to other determinants (i.e. housing supply, residential population, median rent, and housing investors), while no comparable evidence is found for the other regions. This clearly highlights the differences across regions and the importance of submarket considerations in the analysis of homeownership affordability. The implications of the study have also been discussed.