1. The Reserve Bank of Australia has built an empirical model of the Australian housing market that quantifies interrelationships between construction, vacancies, rents and prices.
2. Low interest rates, partly reflecting lower world long-term rates, explain much of the rapid growth in housing prices and construction over the past few years.
3. A large part of the effect of interest rates on dwelling investment, and hence GDP, works through housing prices.
The article "A Model of the Australian Housing Market" by Trent Saunders and Peter Tulip presents an empirical model of the Australian housing market that quantifies interrelationships between construction, vacancies, rents, and prices. The authors find that low interest rates and high immigration explain much of the rapid growth in housing prices and construction over the past few years.
Overall, the article provides a comprehensive analysis of the Australian housing market. However, there are some potential biases and limitations to consider. For example, the authors rely heavily on macroeconomic factors such as interest rates and immigration to explain changes in the housing market. While these factors are undoubtedly important, they may not capture all of the complexities of local housing markets.
Additionally, the article does not explore potential counterarguments or alternative explanations for changes in the housing market. For example, some analysts have suggested that foreign investment may be driving up prices in certain areas. The authors also do not discuss potential risks associated with their findings, such as a potential housing bubble or increased household debt.
Furthermore, while the authors acknowledge that their views do not necessarily reflect those of the Reserve Bank of Australia (RBA), it is worth noting that this research was conducted by RBA economists. As such, there may be some inherent bias towards policies favored by the RBA.
In terms of reporting style, the article is well-organized and easy to follow. The authors provide clear explanations of their methodology and results. However, there are some instances where claims are made without sufficient evidence or support. For example, when discussing rental vacancies, the authors state that "the vacancy rate has a significant negative effect on rent growth." While this claim may be true based on their model results, they do not provide any additional evidence or explanation for why this relationship exists.
Overall, "A Model of the Australian Housing Market" provides valuable insights into factors driving changes in Australia's housing market. However, readers should approach these findings with caution and consider potential biases and limitations when interpreting them.