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Exploring Australian Housing Supply Volatility

Author/s: Chyi Lin Lee, Xiao-Hua Jin

Date Published: 1/01/2011

Published in: Volume 17 - 2011 Issue 4 (pages 634 - 651)

Abstract

This study examines the volatility series of housing supply in Australia. A Generalised Autoregressive Conditional Heteroskedasticity-in-Mean (GARCH-M) model is employed to analyse the volatility series of Australian housing supply over the study period of 1974–2010. The results show the volatility of housing starts is negatively linked to housing starts, suggesting that higher uncertainty does lower housing starts. The results also reveal that the uncertainty of housing starts is also captured by the volatilities of interest rates and construction costs. Therefore policy makers should monitor and attempt to minimise the volatility of housing supply. These steps will enhance housing construction activities and increase the availability of housing supply to potential home buyers.

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Keywords

Australia - Garch-M - Housing Supply - Volatility Modelling

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