Global warming could see Australian house prices continue to climb

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There has been a lot of discussion about the Sydney housing market and the rapid jump in prices. Some commentators have suggested we are in a “housing bubble”. The Reserve Bank has expressed some concerns about the rapid rise in prices and APRA has introduced measures to try and cool the market.

More recently, lower auction clearance rates have led to suggestions by some that the market has peaked and even started to slowdown. Clearance rates across Australia’s capital cities remain below the levels seen earlier this year, reflecting softer performances from Sydney and Melbourne, the nation’s largest housing markets. This is despite the latest weekly data from CoreLogic indicating that the Sydney clearance rate rose.

Apart from interest rates and incomes, there could be other factors affecting house prices.

Research by Dr Adrian Lee from the University of Technology in Sydney has found that the weather can affect prices achieved at house auctions in Sydney.

Lee looked at auction data from the Domain database from 2000-2014 and tracked it against weather data from the Bureau of Meteorology. After controlling for factors such as location and house size, his work showed that the weather on auction day can in fact have a statistically significant impact on prices achieved at auction.

The most positive affects came from selling your house at auction on a day when the sun shone and the weather was warm. Heavy rain or cold weather deters buyers or dampens the mood and results in a lower price achieved.

Lee found that sunny days resulted in an average price 0.75% higher and warmer weather (+10 degrees C) a rise of +0.97%.

This might not sound a lot but when you consider the mean auction result was $870,820, this is an increase of between $6,500 and $8,500.

Considering the predictions for higher global temperatures in the coming years as a result of global warming, we wonder whether this could be a factor that helps Sydney’s housing prices to continue to head onwards and upwards. Perhaps as well as concerns about foreign buyers and investors boosting prices, the RBA and regulators should look to mitigating rising global temperatures.

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