The decomposition of housing market variations : a panel data approach

Purpose – This paper develops a new decomposition method of the housing market variations to analyse the housing dynamics of the Australian eight capital cities.
Design/methodology/approach – This study reviews the prior research on analysing the housing market variations and classifies the previous methods into four main models. Based on this, the study develops a new decomposition of the variations, which is made up of regional information, homemarket information and time information. The panel data regression method, unit root test and F test are adopted to construct the model and interpret the housing market variations of the Australian capital cities.
Findings – This paper suggests that the Australian home-market information has the same elasticity to the housing market variations across cities and time. In contrast, the elasticities of the regional information are distinguished. However, similarities exit in the west and north of Australia or the south and east of Australia. The time information contributes differently along the observing period, although the similarities are found in certain periods.
Originality/value – This paper introduces the housing market variation decomposition into the research of housing market variations and develops a model based on the new method of the housing market variation decomposition.

An agent-based approach to value theory and wealth distribution in economics

Any attempt to model an economy requires foundational assumptions about the relations between prices, values and the distribution of wealth. These assumptions exert a profound influence over the results of any model. Unfortunately, there are few areas in economics as vexed as the theory of value. I argue in this paper that the fundamental problem with past theories of value is that it is simply not possible to model the determination of value, the formation of prices and the distribution of income in a real economy with analytic mathematical models. All such attempts leave out crucial processes or make unrealistic assumptions which significantly affect the results. There have been two primary approaches to the theory of value. The first, associated with classical economists such as Ricardo and Marx were substance theories of value, which view value as a substance inherent in an object and which is conserved in exchange. For Marxists, the value of a commodity derives solely from the value of the labour power used to produce it - and therefore any profit is due to the exploitation of the workers. The labour theory of value has been discredited because of its assumption that labour was the only ‘factor’ that contributed to the creation of value, and because of its fundamentally circular argument. Neoclassical theorists argued that price was identical with value and was determined purely by the interaction of supply and demand. Value then, was completely subjective. Returns to labour (wages) and capital (profits) were determined solely by their marginal contribution to production, so that each factor received its just reward by definition. Problems with the neoclassical approach include assumptions concerning representative agents, perfect competition, perfect and costless information and contract enforcement, complete markets for credit and risk, aggregate production functions and infinite, smooth substitution between factors, distribution according to marginal products, firms always on the production possibility frontier and firms’ pricing decisions, ignoring money and credit, and perfectly rational agents with infinite computational capacity. Two critical areas include firstly, the underappreciated Sonnenschein-Mantel- Debreu results which showed that the foundational assumptions of the Walrasian general-equilibrium model imply arbitrary excess demand functions and therefore arbitrary equilibrium price sets. Secondly, in real economies, there is no equilibrium, only continuous change. Equilibrium is never reached because of constant changes in preferences and tastes; technological and organisational innovations; discoveries of new resources and new markets; inaccurate and evolving expectations of businesses, consumers, governments and speculators; changing demand for credit; the entry and exit of firms; the birth, learning, and death of citizens; changes in laws and government policies; imperfect information; generalized increasing returns to scale; random acts of impulse; weather and climate events; changes in disease patterns, and so on. The problem is not the use of mathematical modelling, but the kind of mathematical modelling used. Agent-based models (ABMs), objectoriented programming and greatly increased computer power however, are opening up a new frontier. Here a dynamic bargaining ABM is outlined as a basis for an alternative theory of value. A large but finite number of heterogeneous commodities and agents with differing degrees of market power are set in a spatial network. Returns to buyers and sellers are decided at each step in the value chain, and in each factor market, through the process of bargaining. Market power and its potential abuse against the poor and vulnerable are fundamental to how the bargaining dynamics play out. Ethics therefore lie at the very heart of economic analysis, the determination of prices and the distribution of wealth. The neoclassicals are right then that price is the enumeration of value at a particular time and place, but wrong to downplay the critical roles of bargaining, power and ethics in determining those same prices.

The accuracy of housing forecasting in Australia

Forecasting is an integral part of all business planning, and forecasting the outlook for housing is of interest to many firms in the housing construction sector. This research measures the performance of a number of industry forecasting bodies; this is done to provide users with an indicator of the value of housing forecasting undertaken in Australia. The accuracy of housing commencement forecasts of three Australian organisations – the Housing Industry Association (HIA), the Indicative Planning Council for the Housing Industry (IPC) and BIS-Shrapnel – is examined through the empirical analysis of their published forecasts supplemented by qualitative data in the form of opinions elicited from several industry “experts” employed in these organisations. Forecasting performance was determined by comparing the housing commencement forecast with the actual data collected by the Australian Bureau of Statistics on an ex-post basis. Although the forecasts cover different time periods, the level of accuracy is similar, at around 11-13 per cent for four-quarter-ahead forecasts. In addition, national forecasts are more accurate than forecasts for individual states. This is the first research that has investigated the accuracy of both private and public sector forecasting of housing construction in Australia. This allows users of the information to better understand the performance of various forecasting organisations.

Investigating housing supply and monetary policy under global economic turbulence

This research has contributed to literature by identifying the impacts of monetary policy and global economic turbulence on the supply side of the housing sector under a vector error correction model. The research outcomes provided policy makers with an insight to change Australia's housing shortage and declining housing affordability.

Effective housing management framework for multi-owner low-cost housing in Malaysia

The aim of this study is to improve the management of multi-storey low-coast housing occupied by low-income households in Malaysia.  this study suggests the residents' background and socio-economic, the occupancy rates, residents' satisfaction with their dwellings and neighbours could resolve and improve housing management issues.

Multi-owner low-cost housing management in Malaysia : effects of owner-occupant characteristics and occupancy rates

Purpose – Homeownership is considered both economically and socially beneficial for homeowners. However, in the collective living arrangement, reaching a consensus with regard to the residential environment is difficult. The purpose of this paper is to identify factors that can reduce the conflict among the stakeholders in multi-owner low-cost housing in Malaysia.
Design/methodology/approach – This study tested three hypotheses examining whether the demographic and socio-economic characteristics of owner-occupants and occupancy rates affect owner-occupants' satisfaction with stakeholders' relationships. Data were collected through questionnaires from owner-occupants of multi-owner low-cost settlements in Selangor state. Data on housing characteristics were collected from chairpersons of the respective owners' organisations. The data were treated as parametric, and analysis of variance was conducted.
Findings – Four factors – number of children in the family, duration of residency, participation in social activities and participation in meetings – were found to affect owners-occupants' satisfaction with the stakeholders' relationships. The significant effect of occupancy rates was also indicated.
Practical implications – The Management Corporations (MCs) should encourage social relationships among residents. To avoid conflict, the costs and benefits of participation must be balanced. Policy makers should take two key aspects seriously: owner-managed strategy practices by the MCs and high rates of tenant-residents. A mechanism should be identified for assisting the MCs in housing management and for protecting the benefits of homeownership for owner-occupants.
Originality/value – Past studies on low-income household settlements examined public housing or low-income homeowners of single detached dwellings. This study adds to the existing body of knowledge by examining low-income homeowners in multi-owner low-cost settlements.

The cost of housing : more than just dollars

Australians were recently awarded the dubious honour of building the largest homes in the world. Our new homes are now seven percent larger than those in the United States and nearly three times larger than those in the United Kingdom. At the same time, the price of an average residential property is now five times what it was 20 years ago. Although incomes have risen over the same period, they have not kept pace with rising house prices. In terms of disposable income, the cost of housing has almost doubled. While traditional housing affordability is measured in terms of house prices and incomes, a broader and more encompassing perspective also indicates that we can no longer ‘afford’ to build houses as we have done in the past. The environmental impact of modern Australian housing is significant. Australians have resisted the need for increased urban density as their capital city populations grow and new houses have been built on the outskirts of the existing cities, encroaching on the greenwedge and agricultural lands, destroying and degrading existing fauna and flora. The houses built have increased carbon emissions because of their size, embodied energy and reliance on the motor car. This paper discusses the environmental ‘affordability’ of current Australian housing and argues that this must be considered alongside traditional affordability criteria so that a more holistic approach to the issues is adopted.

Impact of past and future residential housing development patterns on energy demand and related emissions

The continued outward growth from a central business district has been the dominant characteristic of most cities in Australia. However, this feature is seen as unsustainable and alternative scenarios to contain the outward growth are being proposed. Melbourne is currently grappling with this issue while simultaneously trying to reduce per capita greenhouse gas emissions. Housing size, style and its location are the three principal factors which determine the emissions from the residential sector. This paper describes a methodology to assess the combined impact of these factors on past and possible future forms of residential development in Melbourne. The analysis found that the location of the housing and its size are the dominant factors determining energy use and greenhouse gas emissions.

Analysing the relationship between new housing supply and residential construction costs with the regional heterogeneities

New housing supply in Australia has been experiencing a low rate of increase in conjunction with a dramatic increase in residential construction costs since the 1990s. This study aims to estimate the relationship between new housing supply and residential construction costs with the regional heterogeneities. Based on a panel error correction model, it can be identified that there is a causal link as well as a significant correlation between new housing supply and construction costs in the Australian sub-national housing construction markets. The model developed in this research assists policy makers to better understand the nature of the supply side of the housing sector and then enact appropriate policies to improve the new housing supply in Australia.

Volatility decomposition of Australian housing prices

This study examines the volatility pattern of Australian housing prices. The approach for this research was to decompose the conditional volatility of housing prices into a “permanent” component and a “transitory” component via a Component-Generalized Autoregressive Conditional Heteroskedasticity (C-GARCH) model. The results demonstrate that the shock impact on the short-run component (transitory) is much larger than the long-run component (permanent), whereas the persistence of transitory shocks is much less than permanent shocks. Moreover, both permanent and transitory volatility components have different determinants. The results provide important new insights into the volatility pattern of housing prices which has direct implications for investment in housing by owner-occupiers and investors.