Increasing Housing Affordability by Identifying and Monitoring Property Cycles

1. Increasing Housing Affordability by Identifying and Monitoring Property Cycles 16th Annual European Real Estate Society Conference 24-27 June 2009 – Stockholm Richard G Reed Deakin University Melbourne 3010 Australia Email: richard.reed@deakin.edu.au Hao Wu University of Melbourne 3010 Australia Email: haow@unimelb.edu.au

2. Introduction • Housing stress and affordability • Cycle theory and analysis • Melbourne case study • Methodology and analysis • Findings and conclusions

5. “Business cycles are a type of fluctuation found in the aggregate economic activity of nations that organize their work mainly in business enterprises: a cycle consists of expansions occurring at about the same time in many economic activities, followed by similarly general recessions, contractions, and revivals which merge into the expansion phase of the next cycle; this sequence of changes is recurrent but not periodic; in duration business cycles vary from more than one year to ten or twelve years; they are not divisible into shorter cycles of similar character with amplitudes approximating their own” (Burns and Mitchell 1946, p3).

18. Conclusions and Further Research • Understanding cycles will reduce risk and increase housing affordability • Cycles are evident at the micro level • Cycle length and amplitude vary • Most expensive suburb has the largest shock • Inner-city suburbs have multiple cycles • Spectrum analysis is not common for property cycle analysis • Further research required re: correlation with demographic characteristics

19. Increasing Housing Affordability by Identifying and Monitoring Property Cycles 16th Annual European Real Estate Society Conference 24-27 June 2009 – Stockholm Richard G Reed Deakin University Melbourne 3010 Australia Email: richard.reed@deakin.edu.au Hao Wu University of Melbourne 3010 Australia Email: haow@unimelb.edu.au