Does Immigration Affect Residential Real Estate Prices? Evidence From Australia

Résumé

Abstract Worldwide migration flows have been gaining momentum over the past years, leading to population increases in some countries. Consequently, the population increase might have led to more housing demand in the host country. This study investigates the effect of immigration on housing prices in Australia by using data for eight states on a quarterly basis from 2004 – 2017. To study the possible dynamic and endogenous relationship between housing prices and immigration, a panel vector autoregressive error correction approach (PVECM) is adopted. Analysis of the results indicates that in the short run immigration positively and significantly affects housing prices, whereas in the long run no significant relationship was observed. From the regional breakdown and analysis, it is discerned that in some states there is significant and positive effect of immigration on residential real estate prices in the long run. Interestingly, analysis of reverse causation indicates that housing prices affect migration in a negative and significant way.

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