Market fundamentals and local factors in the housing supply markets

Similar to other markets, the housing market has a supply side. As previous studies focused on the demand side of the market, this study departs from this known literature by examining the local and broader influences of the housing supply markets across metropolitan cities. Theoretically anchored in DiPasquale and Wheaton’s (1994) housing stock flow model, I adopt the Poisson regression and seemingly unrelated regression (SUR) to examine housing supply dynamics within and beyond. I contribute to the literature in several ways: first, external market drivers like housing lending rates, net internal migration and the number of investors resulted in a three-tier market, especially in the non-strata segment. The top-tier non-strata housing markets, Sydney and Melbourne, are largely driven by investor activity, while middle-tier markets, Brisbane and Adelaide, are influenced by net population movement between cities. The bottom tier, Perth and Hobart, is affected solely by housing lending rates. Second, at the local level, rent and price are key factors influencing building starts in Greater Sydney and Melbourne for the non-strata market. This drives investor activity in these top-tier markets, indicating that local factors reinforce external influences. In the strata market, the vacancy rate, combined with rent and price, determines housing starts. Third, the macro–micro framework for both non-strata and strata dwellings illustrates how various market and property variables influence the flow of housing stock. These findings could aid the decisions of several housing stakeholders, including policymakers, developers, homebuyers and investors.