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Responsiveness of residential construction-production progress to house price dynamics

journal contribution
posted on 2020-01-01, 00:00 authored by Le MaLe Ma, H Liu, M Sing

Purpose
This study aims to address the gap by empirically exploring how residential construction-production progress, which includes project commencement, under-construction and project completion, responds dynamically to fluctuations in house prices.


Design/methodology/approach
A vector autoregressive model and an impulse response function are applied to simulate and analyse the circle of the stage-responsiveness of residential construction to residential property price dynamics in the state of Victoria, Australia. The quarterly numbers of dwelling units commenced, under-construction and completed are used as the proxy for the residential construction activities at three stages over the construction progress.


Findings
The analysis indicates that the dynamics are essentially transmitted throughout the construction process and can substantially impact the pace of production progress. The findings from this study provide an empirical base that should be useful in developing price-elasticity and production theories applicable to the context of residential property construction.


Research limitations/implications
The findings described above have been generated basically by examining the case of Victoria, Australia at a macro level. The generalisation of the research output needs to be verified further by future researchers using data collected from other regions/countries. Nevertheless, the reliability of the conclusions with particular practical implications can be substantially improved by future researchers by analysing more markets and production proxies at the activity level.


Practical implications
Based on new empirical findings, this research argues that building activity (i.e. under construction) played as a gateway between the construction and housing sectors, via which the inter-responsiveness of the housing supply in terms of construction activities and housing prices are transmitted.


Originality/value
This research firstly attempts to explore the inter-responsiveness between the real estate and construction sectors. A simulated circle of the stage-responsiveness of residential construction to residential property price dynamics is proposed, which can serve as a significant foundation for developing the theory of construction production.

History

Journal

International Journal of Housing Markets and Analysis

Volume

14

Issue

4

Pagination

796 - 814

Publisher

EMERALD GROUP PUBLISHING LTD

ISSN

1753-8270

eISSN

1753-8289

Language

English

Publication classification

C1 Refereed article in a scholarly journal; C Journal article