Information linkages among National, NSW, VIC, and QLD Real Estate Markets in Australia

Information and volatility linkages among NATIONAL, NSW, VIC and QLD housing markets in Australia has paramount impacts on Australian economy, since residential properties contribute to Australian’s wealth substantially. This research uses the novel rational expectations framework of financial contagion and a combination of robust econometric methods including the Generalized Method of Moments (GMM), correlations and Generalized Impulse Response Method, etc to discover the information and volatility linkages. The finding is solid although as expected that there are information linkages across markets, which are revealed in the correlations of their volatilities and correlations of the house price returns. Moreover, the volatilities reflect house price patterns of the most important four real estate economic cycles over the last 20 years in Australia.