Impact of Inflation, Unemployment, and Population on Housing Price in Australian Capital Cities

Running head: BUSINESS RESEARCH METHODOLOGY
Business Research Methodology
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1BUSINESS RESEARCH METHODOLOGY
Housing market in Australia has experienced huge volatility in recent years. Housing
price fluctuates highly particularly in capital cities of Australia such as Sydney, Melbourne,
Brisbane, Canberra and others (Lee, 2017). Studies based on single and cross-country level finds
that movement in housing price is strongly interconnected to macroeconomic variables at both
country and international level (Ozturk, Kapusuz & Tanrıvermiş, 2018). The macroeconomic
factors such as real GDP, inflation, employment, population growth and other significantly
influence property price (Mallick & Mahalik, 2012).
Inflation is defined as the sustained increase in the price of a broad range of commodities.
Inflation rate influenced the purchasing power of money (Renigier-Biłozor & Wisniewski,
2012). Theoretically, inflation is expected to have a positive influence on housing price. One
study evaluating the relation between housing price and inflation concludes that in Germany,
housing price inflation has outpaced that of consumer price inflation (Belke & Keil, 2018).
Another channel through which inflation rate can influence housing price is through monetary
policy where interest rate works as an intermediary channel (Sivitanides, 2018).
There are house price models that evaluates relation between employment and housing
price (Karakoyun & Yildirim, 2017). These models consider unemployment as an indicator of
risk of labor market. The risk of unemployment reduces willingness of household to get
mortgage. This tends to reduce housing price by lowering demand (Zhang, Hua & Zhao, 2012).
A significant factor determining housing demand and hence, price is population growth
(Gaspareniene, Remeikiene, & Skuka, 2016). Study on structure and size of population in China
reveals that speed of population growth actually exceed that of supply of new dwellings resulting
in an increase in house price (Wang & Jiang, 2016).