- Based on population dynamics, the risk of an imminent day of reckoning for Australian house prices appears low in our opinion. Indeed, based on population projections and real GDP growth forecasts, Australian house prices are likely to deliver a moderate rate of appreciation once the current modest overvaluation has been worked through. Supporting this thesis, at least temporarily, is the recent strength in home loan growth.
- In this note we constructed a vector autoregressive model to estimate the determinants house prices in Australia. The appeal of this technique is that it captures the feedback effect among the variables, in this case population and economic growth, and house prices.
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BARCLAYS CAPITAL
ECONOMICS RESEARCH