Housing networks and driving forces

Abstract

This paper investigates patterns in housing market networks using Australian and Chinese data and a novel econometric approach based on pairwise time-varying Granger causality tests. The focus is on four fundamental questions. (1) Have housing markets become increasingly connected over time? (2) Does housing market connectivity increase or decrease with house prices? (3) Are socio-economic and geographic proximity important for housing market connections? (4) Do economic fundamentals or sentiment drive connectivity? The results reveal interesting differences in these markets and suggest that one size is not likely to fit all in terms of housing market policy.