Greg Costello

Towards a system of local house price indicies

This paper argues that understanding of the performance and price structure of urban housing markets in the UK would be enhanced by limited investment in comprehensive systems for collecting data on housing transactions. These data would allow the construction of reliable and accurate indices at different levels of spatial aggregation. The empirical part of the paper uses data from the Western Australian Valuer Generals Office to illustrate the data requirements and practical considerations in the construction of indices. The dataset provides comprehensive information on property attributes and the sales history of individual transactions and allows a comparison of the accuracy of a number of variants on the hedonic and repeat-sales index methods. The evidence suggests repeat-sales indices can be constructed on less detailed data with little loss of accuracy. The paper concludes by suggesting that repeat-sales methods, although largely ignored in the UK to date, lend themselves well to the development of a system of local price indices using the information recorded by the Land Registry.

Accuracy and robustness of house price index methods

We evaluate the statistical properties of five different house price index methods with the objective of identifying one that is most accurate and robust when estimated at frequent time intervals and for distinctly local markets. We adopt a split-sample technique to establish a consistent basis for comparison of the different price index methods. Our results demonstrate that if suitable data is available for estimation of price indexes, the arbitrary aggregation of data across time and geography is not warranted. One model, the ‘hedonic imputation’, outperforms alternative models on all measures of accuracy and robustness. Differences in levels of accuracy between different models are found to be statistically significant.

The Predictive Performance of Multilevel Models of Housing Sub-markets: A Comparative Analysis

Much of the housing sub-market literature has focused on establishing methods that allow the partitioning of data into distinct market segments. This paper seeks to move the focus on to the question of how best to model sub-markets once they have been identified. It focuses on evaluating the effectiveness of multilevel models as a technique for modelling sub-markets. The paper uses data on housing transactions from Perth, Western Australia, to develop and compare three competing sub-market modelling strategies. Model 1 consists of a city-wide ‘benchmark’; model 2 provides a series of sub-market-specific hedonic estimates (this is the ‘industry standard’) and models 3 and 4 provide two variants on the multilevel model (differentiated by variation in the degrees of spatial granularity embedded in the model structure). The results suggest that the more granular multilevel specification enhances empirical performance and reduces the incidence of non-random spatial errors.

Seasonal Influences in Australian Housing Markets

Abstract This paper examines the impact of seasonal influences on housing market activity. Empirical tests examine the influence of a quarterly season on the demand for housing and the observed real house price changes. Empirical tests are specifically designed for a ‘short’ time-series, 1988-95. The explanatory power of the statistical tests is improved by ‘stacking’ regional data to perform more robust tests for seasonality. The results confirm significant seasonal influences. The volume of transactions and hence demand is greatest during the first quarter of a year and lowest during the last quarter. The observed real house price changes are highest in the first quarter of a year and lowest during the third quarter.

Property Development Principles and Process – An Industry Analysis

Abstract Property development is widely regarded as an integrated process revolving around numerous components that link distinct phases in the development cycle. This paper explores industry participants ‘ perceptions of important components of the property development process. We focus upon the development of commercial property in Queensland Australia. Utilising a sample of major Queensland-based developer, we use a questionnaire to survey industry perceptions of the important concepts in the property development industry. The main emphasis of the survey is to identify common principles and characteristics of the property development process as they occur prior to the commencement of construction activities. Our results confirm that in general, developers apply many pre-construction development principles within a structured framework. We conclude by identifying and discussing several key performance areas identified in our survey responses: (i) location and site selection, (ii) market research/analysis, and (iii) feasibility principles incorporating design development and financial analysis.

The Impact of Stamp Duty Reductions on Demand in the Perth Housing Market

Abstract In 2004, the Western Australian state government announced and implemented policy incentives for first-home buyers in the form of either total conveyance duty (stamp duty) exemptions or significant reductions for specified price bands of housing. This paper analyses the impact of this policy on demand in the Perth housing market. Results confirm an immediate and significant impact on demand in both price segments that were the target of policy and to a lesser extent also within price segments that were not the target of policy. Results also confirm some important information diffusion or ‘news’ effects. The release of information two months prior to enactment of the policy lead to a pronounced decline in demand for cheaper housing and also in other price segments prior to enactment of the policy.

Safe As Australian Houses? Financial Returns, Volatility and Taxation Policy 1999-2015

This paper estimates ex-post returns to Australian housing in Australian capital cities 1999 2015 considering the cycle of asset ownership; acquisition, annual operations, taxation and disposition. Modelling accommodates financial leverage and varying taxation regimes. Results confirm home ownership as a significant source of wealth creation. Financial leverage is beneficial for owners and investors, also increasing volatility. In general, owner-occupier returns exceed investors due to capital gains tax exemption. When returns are lower investors can be ‘immunised’ against greater losses due to ‘negative gearing’ tax shelter benefits. Significant regional variations exist both in the scale of returns and in temporal cycles.

The Impact of Monetary Policy on Australian Capital City House Prices: The Case of Australia

Using Australian national economic data and state level house prices we construct a structural vector autoregressive (SVAR) model to identify the impact of common monetary policy shocks on house prices both at national and state levels. Our results suggest that the impact of a shock to interest rates on national aggregate house prices is almost neutral. However, aggregation influences mask asymmetries in the responses of state capital city housing markets. Positive shocks to interest rates on capital city house prices exhibit significant asymmetries.

RTM Whipple – A Distinguished Career in Property

Abstract This paper provides a chronological review of the career of the late RTM (Tom) Whipple. Tom is widely regarded as being Australia’s first “senior” property academic and was considered as a leader to many within the academic community. He spent his entire working life within the property industry, both as a practitioner and esteemed academic. His career can be viewed as comprising four main periods; the early period in industry 1949–1966, the Sydney University period 1966–1989, the Curtin University period 1989–1997 and the retirement period 1997–2010. This paper reviews all of these periods. The paper provides a comprehensive bibliography of Tom’s publications. So as to provide an appropriate context and to familiarise the reader with the work, these publications are discussed in the text by year and title with full publication details contained in the bibliography. The paper concludes with a discussion of Tom’s final research contributions and a pertinent quotation taken from his final written communication to his many colleagues within the Pacific Rim Real Estate Society (PRRES) community.