Is the Australian housing market in a bubble?

Purpose: This paper aims to explore principal drivers affecting prices in the Australian housing market, aiming to detect the presence of housing bubbles within it. The data set analyzed covers the past two decades, thereby including the period of the most recent housing boom between 2012 and 2015. Design/methodology/approach: The paper describes the application of combined enhanced rigorous econometric frameworks, such as ordinary least square (OLS), Granger causality and the Vector Error Correction Model (VECM) framework, to provide an in-depth understanding of house price dynamics and bubbles in Australia. Findings: The empirical results presented reveal that Australian house prices are driven primarily by four key factors: mortgage interest rates, consumer sentiment, the Australian S&P/ASX 200 stock market index and unemployment rates. It finds that these four key drivers have long-term equilibrium in relation to house prices, and any short-term disequilibrium always self-corrects over the long term because of economic forces. The existence of long-term equilibrium in the housing market suggests it is unlikely to be in a bubble (Diba and Grossman, 1988; Flood and Hodrick, 1986). Originality/value: The foremost contribution of this paper is that it is the first rigorous study of housing bubbles in Australia at the national level. Additionally, the data set renders the study of particular interest because it incorporates an analysis of the most recent housing boom (2012-2015). The policy implications from the study arise from the discussion of how best to balance monetary policy, fiscal policy and macroeconomic policy to optimize the steady and stable growth of the Australian housing market, and from its reconsideration of affordability schemes and related policies designed to incentivize construction and the involvement of complementary industries associated with property

Household mortgage demand: a study of the UK, Australia and Japan

Households combine their personal savings and mortgage debt to finance their home purchases. In developed countries, mortgage debt is the largest debt on a household’s balance sheet and in these countries, the mortgage penetration rates are high. For the stability of the mortgage market and thereby the money market in an economy, it is important to understand households' mortgage demand decisions and riskiness of these borrowers. There are differences in mortgage systems among countries, which play an important role in determining the mortgage decisions that households make. These differences arise from the availability of types of mortgage instrument (adjustable versus fixed rate mortgages), length of fixed period for a fixed rate mortgage contracts, conditions of prepayment, tax treatment, lenders’ constraints related to repayment, loan to value ratio, foreclosure and personal bankruptcy laws etc. These differences impact borrowers' choice of mortgage contract and mortgage demand. This paper analyses the mortgage demand behaviour of households in the UK, Australia and Japan. Specific questions that have been asked relate to the factors that determine household mortgage demand, housing demand and loan to value ratio. Though the homeownership is a preferred tenure and the mortgages are 'recourse' loans, housing markets in these three countries operate in different mortgage market institutional structure. Results indicate that income elasticity of mortgage demand differ despite income elasticity of housing demand being similar. Mortgage institutions that pose constraints for borrowers also determine the extent of mortgage demand. Other factors such as demography, economic conditions have also played an important role in determining mortgage and housing demand

Supply driven mortgage choice

Variable mortgage contracts dominate the UK mortgage market (Miles, 2004). The dominance of the variable rate mortgage contracts has important consequences for the transmission mechanism of monetary policy decisions and systemic risks (Khandani et al., 2012; Fuster and Vickery, 2013). This raises an obvious concern that a mortgage market such as that in the UK, where the major proportion of mortgage debt is either at a variable or fixed for less than two years rate (Badarinza, et al., 2013; CML, 2012), is vulnerable to alterations in the interest rate regime. Theoretically, mortgage choice is determined by demand and supply factors. So far, most of the existing literature has focused on the demand side perspective, and what is limited is consideration of supply side factors in empirical investigation on mortgage choice decisions. This paper uniquely explores whether supply side factors may partially explain observed/ex-post mortgage type decisions. Empirical results detect that lenders’ profit motives and mortgage funding/pricing issues may have assisted in preferences toward variable rate contracts. Securitisation is found to positively impact upon gross mortgage lending volumes while negatively impacting upon the share of variable lending flows. This shows that an increase in securitisation not only improves liquidity in the supply of mortgage funds, but also has the potential to shift mortgage choices toward fixed mortgage debt. The policy implications may involve a number of measures, including reconsideration of the capital requirements for the fixed, as opposed to the variable rate mortgage debt, growing securitisation and optimisation of the mortgage pricing policies

Household Mortgages Choice Decisions

This data set is based upon the Understanding Society Data Survey and focused upon mortgage choice decision perspectives. This also contains a number of macroeconomic variables and house values data. The dataset also incorporates data from the Bank of England database, for nominal interest rates; the Office for National Statistics, for inflation in order to calculate real rates, and nationwide statistics for house prices

Accuracy of households’ dwelling valuations, housing demand and mortgage decisions: Israeli case

Housing policy, as well as academic research, are increasingly concerned with the role of bias in subjective dwelling valuations as a proximate measure of households' house price expectations and their relationship with housing demand. This paper contributes to this area of study by exploring the possibility of simultaneous relationships between households’ price expectations and incentive to maximise the size of housing services demanded also accounting for the supply side factors and regional perspective. The empirical estimation takes the form of a system of a two simultaneous equations model applying two stage least squares estimation technique. Cross sectional estimations utilise data extracted from the Israeli Longitudinal Panel Survey (LPS) data. Applying the best available proxy for households’ price expectations, calculated as the ratio between subjective dwelling valuations (LPS) and the estimated market value of the same properties, research has identified the interrelated factors that simultaneously influence householders’ price expectations and housing demand. Results offer conceptual and empirical advantages, highlighting the imperfect nature of the housing market, as reflected by the inseparability of bias in subjective valuations and housing decisions

Valuation modelling within thin housing markets case study: Arab housing market in Israel

The primary aim of this paper is to introduce valuation modeling applicable to thin housing markets, with a focus on the Arab housing sector in Israel. The estimation procedure utilizes two input values: transaction data and subjective valuations provided by property owners, the data for which are derived from the Israel Tax Authority (ITA) and the Household Expenditure Survey (HES). Average property values are also weighted and ranked according to location, size, and average income factors. The main contribution of these modeling techniques is that they can be employed to estimate the residential property values in markets that experience a low frequency of housing transactions and where information is limited, with the added benefit of understanding housing value movement and market dynamics. Housing policies could be influenced by this deeper understanding of house price behavior within localities and submarkets, potentially with the ability to monitor changes in dwelling values and segmentation and segregation effects

Control of food flavours in confectionery mass using sorption gas sensors

Изучена зависимость аналитических сигналов многоканального анализатора газов «МАГ-8» с методологией «электронный нос» при сорбции легколетучих соединений равновесной газовой фазы над шоколадными изделиями на тонких пленках-модификаторах электродов пьезокварцевых резонаторов, составляющих массив измерительных элементов. Изучено формирование легколетучей фракции аромата полупродуктов кондитерского производства при добавлении пищевых ароматизаторов. Разработан способ контроля оптимального содержания пищевых ароматизаторов в шоколадной глазури и кондитерских массах.It has been studied the dependence of analytical signals of multichannel gases analyzer "MAG-8" with methodology “electronic nose” during the sorption of volatile compounds of equilibrium gaseous phase above chocolate production on the thin films – modifiers of piezoelectric quartz resonators electrodes which are an array of measuring elements. The formation of volatile fraction of confectionery production half-product flavor by adding flavorings has been studied. The method of the control of optimal flavoring content in the chocolate glaze and confectionery masses has been developed