Supply Elasticity Estimates for the Sydney Housing Market

Abstract

This article presents estimates of the supply elasticity for residential property in metropolitan Sydney over the period 1991–2006. Our results suggest that supply is inelastic - less than unity - for all types of housing, although the supply elasticity is relatively larger for strata properties (apartments and flats) than for non‐strata properties (separate and semi‐detached houses, terraces and townhouses). We also find evidence of a significant fall in supply elasticity between 1991–1996 and 2001–2006. When the median time taken by a local council to decide on a development application is included in the supply curve, it is found to have a negative effect on the supply of residential property. However, split‐sample estimates indicate this effect is largely confined to the 1991–1996 period.