Hot property in New Zealand: Empirical evidence of housing bubbles in the metropolitan centres

Greenaway‐McGrevy, Ryan; Phillips, Peter C.B.

doi:10.1080/00779954.2015.1065903

Cited by 77 publications

(52 citation statements)

References 16 publications

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“…Expensive property, relative to potential earnings in rent, in Sydney can be explained, at least in part, by sustained market exuberance that has produced a bubble in the housing market since early 2014. This result is similar to the findings of Greenaway-McGrevy and Phillips (2016) for the Auckland property market in New Zealand since 2013. Figure 6 presents the results for the bubble detection test for quarterly ln(p t /r t ) using the adjusted sample period 1991q1-2015q3.…”

Section: Empirical Results and Policy Implicationssupporting

confidence: 90%

“…Application of the PSY tests is unable to answer this. To answer this question requires a generative mechanism for the bubble with driver variables as predictors (Greenaway-McGrevy & Phillips, 2016). While Greenaway-McGrevy and Phillips (2016) and offer some preliminary ideas about how it could be constructed, no such model yet exists in the literature.…”

Section: Empirical Results and Policy Implicationsmentioning

confidence: 99%

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Dating the Timeline of House Price Bubbles in Australian Capital Cities

et al. 2016

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House prices in some Australian capital cities have recently been on the rise to the extent that some describe this as an emerging bubble, but this claim remains formally untested to date. We apply a recently developed time series procedure to detect, and time‐stamp, bubbles in house price to rent ratios in Australian capital cities. The results show a sustained, yet varying, degree of speculative behaviour in all capital cities in the 2000s before the 2008 global financial crisis (GFC) engulfing different housing markets. The onset of these bubbles was soon after the federal government introduced a major change to the capital gains tax law, and all of these bubbles collapsed with or before the GFC. As of January 2016 only Sydney exhibits significant evidence of an exuberant rise in house prices compared to rents. We believe that the method we apply has the potential to be a general early warning indicator to detect housing bubbles in other countries/markets. We provide the programming files to enable researchers to implement this test in other countries.

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Section: Empirical Results and Policy Implicationssupporting

confidence: 90%

Section: Empirical Results and Policy Implicationsmentioning

confidence: 99%

Dating the Timeline of House Price Bubbles in Australian Capital Cities

et al. 2016

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“…Using an asset pricing approach, Bourassa, Hoesli and Oikarinen (2016) find that a simple price-to-rent ratio measure performs well in both ex post and in real-time bubble analysis. Meanwhile, Greenaway-McGrevy and Phillips (2016) show the presence of bubbles in major cities in New Zealand beginning from 2003 to 2008 using quarterly price-to-rent ratios.…”

Section: Empirical Estimation Strategymentioning

confidence: 99%

Catch Animal Spirits in Auction: Evidence from New Zealand Property Market

Shi

Kabir

2017

Real Estate Economics

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Following the animal spirits theory proposed by Akerlof and Shiller, this article contributes to behavior economics by investigating the possibility of using auction sales data to capture evidence of irrational exuberance in the housing market. Using the monthly percentages of residential property auction sales for Auckland, Wellington and Christchurch regions in New Zealand from 2006 to 2015, and the exuberance testing method proposed by Phillips, Shi and Yu, we find that animal spirits have been developing in the Auckland housing market since 2013, but not in other regions. When compared to the results based on price‐to‐rent ratios, auction sales provide more meaningful results for identifying market‐wide irrational exuberance at an early stage. The causality test on price‐to‐rent ratios and auction sales volume shows that asset prices and animal spirits influence each other in the short run. In the long run, prices have significant effect on animal spirits, but not vice versa.

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“…Both these ideas have been used in practical econometric work. They also provide a mechanism for modeling nonstationarity through the vehicle of nearly integrated time series without insisting on a fixed local unit root structure, thereby accommodating departures from unity in both stationary and explosive directions that can evolve over time Greenaway-McGrevy and Phillips, 2016). Such models are called functional local unit root models 524 A. BYKHOVSKAYA AND P. C. B. PHILLIPS (FLURs).…”

Section: Introductionmentioning

confidence: 99%

Boundary Limit Theory for Functional Local to Unity Regression

Bykhovskaya

Phillips

2018

Journal Time Series Analysis

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This article studies functional local unit root models (FLURs) in which the autoregressive coefficient may vary with time in the vicinity of unity. We extend conventional local to unity (LUR) models by allowing the localizing coefficient to be a function which characterizes departures from unity that may occur within the sample in both stationary and explosive directions. Such models enhance the flexibility of the LUR framework by including break point, trending, and multidirectional departures from unit autoregressive coefficients. We study the behavior of this model as the localizing function diverges, thereby determining the impact on the time series and on inference from the time series as the limits of the domain of definition of the autoregressive coefficient are approached. This boundary limit theory enables us to characterize the asymptotic form of power functions for associated unit root tests against functional alternatives. Both sequential and simultaneous limits (as the sample size and localizing coefficient diverge) are developed. We find that asymptotics for the process, the autoregressive estimate, and its t‐statistic have boundary limit behavior that differs from standard limit theory in both explosive and stationary cases. Some novel features of the boundary limit theory are the presence of a segmented limit process for the time series in the stationary direction and a degenerate process in the explosive direction. These features have material implications for autoregressive estimation and inference which are examined in the article.

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Hot property in New Zealand: Empirical evidence of housing bubbles in the metropolitan centres

Cited by 77 publications

References 16 publications

Dating the Timeline of House Price Bubbles in Australian Capital Cities

Dating the Timeline of House Price Bubbles in Australian Capital Cities

Catch Animal Spirits in Auction: Evidence from New Zealand Property Market

Boundary Limit Theory for Functional Local to Unity Regression

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