Xiangling Liu
This paper estimates the income elasticity of house prices over a long-term time period of 1991 to 2012 for 144 LGAs in New South Wales of Australia. The income elasticity of house prices is estimated to be 0.69 by multi-factor panel data models accounting for cross-section dependence and serial correlation.
The estimate confirms a co-integrated long-run relationship between real house prices and real income. Alternatively, the income elasticity is estimated to be 0.46 using traditional spatial autoregressive models, where the spatial matrix is specified as a distance weighted matrix. The spatial effect of house price in one location is estimated significantly to be 0.84.
Download (1.54 MB)