Determining House Prices in Australia

Determining the key drivers of Sydney's price

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1. Executive Summary

This report will contain an analysis of the effect that several independent variables have on an Index that measures the value of Sydney's Property Prices over 1994-2014. In order to find these variables and understand their importance, we utilised an OLS regression model to optimise and then signify the level of variance explained by each variable. Overall, we were able to successfully find several variables which provided a level of understanding for our dependent variable and the methodology and actual empirical results will be demonstrated and evaluated through the report.  

Contents

1        Executive Summary        

2        Introduction        

3        Related literature        

4        Data and methodology        

4.1        Data        

4.2        Methodology        

4.3        Multicollinearity Test        

5        Empirical results        

5.1        Table and analysis        

5.2        Notes on sources of error        

6        Conclusion        

7        Appendix        

7.1        Reference        

7.2        Further graphs        

7.3        Matlab Code        

1. Introduction

The rise in Sydney's house prices over the past 20 years has been unprecedented, growing 355% since 1994 or at CAGR of 13.51%. Whilst housing prices around the world have fluctuated, or crashed, Sydney's house prices have defied expectations and continued to rise. While this growth has generally been broad-based across Australia, Sydney has been especially susceptible to rising house prices in recent years. For our group project, we decided to analyse the drivers of Sydney house price growth over a twenty year period. Specifically, we analysed the correlation between quarterly changes in YoY growth of the Sydney House Price Index and quarterly changes in YoY change of eleven variables that were hypothesised to have a plausible relationship, namely: