The role of price spillovers in the Australian housing crisis: A two-market analysis

Shu-Hen Chiang; Chyi Lin Lee; Chi Man Eddie Hui

doi:10.1016/j.cities.2026.107248

The role of price spillovers in the Australian housing crisis: A two-market analysis

Shu-Hen Chiang
, Chyi Lin Lee^*
, Chi Man Eddie Hui

^*Corresponding author for this work

Department of Public and International Affairs

Research output: Journal Publications and Reviews › RGC 21 - Publication in refereed journal › peer-review

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Abstract

Australia's soaring housing prices have intensified affordability concerns, with a key emerging issue being the widening price gap between houses and units. While prior spillover studies primarily examined how housing booms spread between cities, this research introduces a novel two-market spillover model that augments the traditional Diebold-Yilmaz framework to capture both house-unit spillover disparities and cross-market interactions within and across capital cities. Our findings reveal that skyrocketing house prices generate significantly stronger spillovers than units, reinforcing their dominant role in driving market-wide fluctuations. Moreover, intercity house spillovers exceed intra-city effects, highlighting the systemic nature of price transmission across regions. Given these insights, policy efforts should focus on mitigating overheated intercity house spillovers (demand-side measures), rather than attributing affordability challenges solely to unit supply shortages. This study provides a new empirical foundation for understanding housing market volatility and guiding more effective regulatory interventions. © 2026 The Author(s).

Original language	English
Article number	107248
Number of pages	21
Journal	Cities
Volume	177
Online published	5 Jun 2026
DOIs	https://doi.org/10.1016/j.cities.2026.107248
Publication status	Online published - 5 Jun 2026

Funding

We thank the editor and three anonymous reviewers for their constructive feedback, which has significantly improved the substance and delivery of this paper. Lee acknowledges support from the UNSW School of Built Environment Special Studies Program (SSP) Grant.

UN SDGs

This output contributes to the following UN Sustainable Development Goals (SDGs)

SDG 11 Sustainable Cities and Communities

Research Keywords

House and unit
Housing crisis
Price disparity
Spillovers
Two-market spillover model

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This full text is made available under CC-BY 4.0. https://creativecommons.org/licenses/by/4.0/

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abstract = "Australia's soaring housing prices have intensified affordability concerns, with a key emerging issue being the widening price gap between houses and units. While prior spillover studies primarily examined how housing booms spread between cities, this research introduces a novel two-market spillover model that augments the traditional Diebold-Yilmaz framework to capture both house-unit spillover disparities and cross-market interactions within and across capital cities. Our findings reveal that skyrocketing house prices generate significantly stronger spillovers than units, reinforcing their dominant role in driving market-wide fluctuations. Moreover, intercity house spillovers exceed intra-city effects, highlighting the systemic nature of price transmission across regions. Given these insights, policy efforts should focus on mitigating overheated intercity house spillovers (demand-side measures), rather than attributing affordability challenges solely to unit supply shortages. This study provides a new empirical foundation for understanding housing market volatility and guiding more effective regulatory interventions. {\textcopyright} 2026 The Author(s).",

keywords = "House and unit, Housing crisis, Price disparity, Spillovers, Two-market spillover model",

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Y1 - 2026/6/5

N2 - Australia's soaring housing prices have intensified affordability concerns, with a key emerging issue being the widening price gap between houses and units. While prior spillover studies primarily examined how housing booms spread between cities, this research introduces a novel two-market spillover model that augments the traditional Diebold-Yilmaz framework to capture both house-unit spillover disparities and cross-market interactions within and across capital cities. Our findings reveal that skyrocketing house prices generate significantly stronger spillovers than units, reinforcing their dominant role in driving market-wide fluctuations. Moreover, intercity house spillovers exceed intra-city effects, highlighting the systemic nature of price transmission across regions. Given these insights, policy efforts should focus on mitigating overheated intercity house spillovers (demand-side measures), rather than attributing affordability challenges solely to unit supply shortages. This study provides a new empirical foundation for understanding housing market volatility and guiding more effective regulatory interventions. © 2026 The Author(s).

AB - Australia's soaring housing prices have intensified affordability concerns, with a key emerging issue being the widening price gap between houses and units. While prior spillover studies primarily examined how housing booms spread between cities, this research introduces a novel two-market spillover model that augments the traditional Diebold-Yilmaz framework to capture both house-unit spillover disparities and cross-market interactions within and across capital cities. Our findings reveal that skyrocketing house prices generate significantly stronger spillovers than units, reinforcing their dominant role in driving market-wide fluctuations. Moreover, intercity house spillovers exceed intra-city effects, highlighting the systemic nature of price transmission across regions. Given these insights, policy efforts should focus on mitigating overheated intercity house spillovers (demand-side measures), rather than attributing affordability challenges solely to unit supply shortages. This study provides a new empirical foundation for understanding housing market volatility and guiding more effective regulatory interventions. © 2026 The Author(s).

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The role of price spillovers in the Australian housing crisis: A two-market analysis

Abstract

Funding

UN SDGs

Research Keywords

Publisher's Copyright Statement

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