The determinants of house prices in New Zealand: An aggregate and regional analysis

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Abstract
This paper models the determinants of house prices in New Zealand at an aggregate and regional level. We model the demand for housing as part of households ‘ overall consumption decision and combine it with a supply curve and an aggregate consumption function. Dynamics are captured through an asymmetric error‐correction mechanism: house price booms are different to house price slumps. House prices in 14 regions are also modelled. We find that relative house prices are affected by a region's economic performance, population, and by agricultural commodity prices. In contrast to UK evidence, we do not find that house prices in regions that are geographically close are more likely to be cointegrated.