A Forced Autoregressive Model of Australian Residential Property Price Dynamics: Credit, Migration, Monetary Policy, and Supply Interactions 2003-2026

Fedoseev, Alex and Djolic, Matija (2026): A Forced Autoregressive Model of Australian Residential Property Price Dynamics: Credit, Migration, Monetary Policy, and Supply Interactions 2003-2026. Forthcoming in:

Abstract

Research Question/Issue: How do credit, migration, monetary policy, construction, and wages interact to drive Australian residential property price growth, and at what speeds do they transmit? Research Findings/Insights: A forced AR(2) model with six macroeconomic drivers achieves adjusted R² = 0.918 against the national median of year-on-year price growth across approximately 7,200 suburban markets (2003–2026). Credit acceleration is the dominant driver. Migration operates with a 3-year lag that matches the settlement-to-ownership pipeline. Residential approvals show a sign reversal: positive contemporaneously (demand signal) and negative at a 2-year lag (supply arrival). Granger causality tests confirm credit and migration as exogenous; wages and the cash rate respond to the property cycle rather than causing it. Practitioner/Policy Implications: The framework allows year-by-year attribution of price growth to specific macroeconomic forces. That credit acceleration dominates has clear relevance for macroprudential policy design. The 3-year migration lag suggests housing supply planning should anticipate demand over a multi-year horizon. Methods: Descriptive decomposition via a forced autoregressive model estimated by differential evolution. The analysis is associational; Granger causality tests assess predictive direction but do not establish structural causation.

• Item Type: MPRA Paper
• Language: English
• Keywords: residential property prices, autoregressive models, housing credit, monetary policy, net overseas migration, building approvals, macroprudential policy, Australia
• Subjects: E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E51 - Money Supply ; Credit ; Money Multipliers; E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E52 - Monetary Policy; R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R3 - Real Estate Markets, Spatial Production Analysis, and Firm Location > R31 - Housing Supply and Markets

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