The relationship between
house prices and
demographic variables
An Australian case study
Richard Reed
Faculty of Business and Law, Deakin University, Melbourne, Australia
Abstract
Purpose – The process for examining the value of house prices in an urban city has given limited
attention, if any, to demographic variables associated with urban geography. Although the disciplines
of property/real estate and demography have moved closer, little progress has been made when
modelling house prices using population-related data in the eld of urban geography to explain the level
of house prices.
Design/methodology/approach – This paper proposes an innovative model to examine the
inuence of population variables on the level of house prices. It used a two-stage approach as follows:
principal components analysis (PCA) identied social dimensions from a range of demographic
variables, which were then retained for further analysis. This information was sourced from two
Australian Bureau of Statistics censuses undertaken involving all Melbourne residents during 1996,
2001, 2006 and 2011; multiple regression analysis examined the relationship between the retained factor
scores from the PCA (as independent variables) and established residential house prices (as the
dependent variable).
Findings – The ndings conrm the demographic prole of each household, which is directly related
to their decisions about housing location and house prices. Based on a case study of Melbourne, Victoria,
it was demonstrated that households with specic demographic characteristics are closely related to a
certain level of house prices at the suburban level.
Originality/value – This is an innovative study which has not been previously undertaken for an
extended period of time to facilitate an analysis of change over time.
Keywords Australia, Housing, Housing prices, Residential property, Real estate, Demography
Paper type Research paper
Introduction
The level of house prices and also housing affordability continues to receive increased
attention to better understand the drivers behind market trends, although limited
consideration has traditionally been given to socio-spatial considerations with reference
to demographic considerations (Pawson and Herath, 2015). Many aspects of society are
affected by the level of house prices including the ability of rst-time buyers to enter the
housing market (Lee and Reed, 2014), maintain housing affordability (Andrew, 2012)
and identify locations adversely affected by a high volume of foreclosures (Schafran,
2013). There remains an inherent level of volatility in many housing markets with
reoccurring “boom– bust” cycles, where the discussion is largely limited to examining
property cycle trends. Markets in urban cities including Sydney (ABS, 2014b) and
London (ONS, 2015) are examples of increases in house prices with limited explanation;
The current issue and full text archive of this journal is available on Emerald Insight at:
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IJHMA
9,4
520
Received 3 February 2016
Revised 21 April 2016
Accepted 24 June 2016
International Journal of Housing
Markets and Analysis
Vol. 9 No. 4, 2016
pp. 520-537
© Emerald Group Publishing Limited
1753-8270
DOI
10.1108/IJHMA-02-2016-0013
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