Aveneu Park, Starling, Australia

House housing markets being overvalued. LITERATURE REVIEW

House price is
nothing more a burden for those who consider to buy and own a house. It is good
to know the current situation and investigate the factor affecting house price
in Asia Pacific country. Home ownership requires high expenditures, and buyers often
face dilemma when intending to buy a house because they need to face with the
question of ability and needs. Buying a house requires highly financial
commitment as it is a long-term investment with large benefits.


According to Pei
Li (2011), house price index provides an indicator of measuring the standard of
living and wealth of households and nations. The purpose of a house price index
is to enable such monitoring the changes of the house prices over time. House
prices are likely to rise in a rapidly growing economy based on the basic
principles of economics. Housing can affect the wider economy in several ways.
Many empirical studies have shown that changes in the market value of housing
wealth have a strong impact on consumers? expenditure. across a number of
countries have led to worried about housing markets being overvalued.

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Gross domestic product (GDP) is the total money value
of the all final goods and services produced by factors of production in a
country over a given period of time. GDP can be measured at current prices or
constant prices. If the domestic output is calculated on the basis of
prevailing prices it is referred to as GDP at current prices. GDP at constant
price refers to fixed prices prevailing in a base year. The effect of per
capita GDP on house prices to be positive and significant. According to Valadez
(2011), his study reveals a statistically significant correlation between the
housing price index and the GDP. According to Piazzesi
and Scheneider (2009), the housing price has strong positive relationship with
GDP. According to Zhu (Zhu, 2006), the housing market and housing price
demonstrated a very significant positive correlation with GDP in Asia,
especially in China and Korea. Globalization has much stronger effects towards
housing price movement

 According to Valadez (2011), he revealed the
long standing relationship between a nation’s economic footing as measured by
its GDP and housing prices has been observed and studied over the past century
by academicians as well as by private and public officials. The study looked at
the relationship between housing and GDP before, during, and after the most
climatic period of our economic time since the great depression of the 1930s.
The period between the first quarter of 2005 and the end of 2009 saw dramatic
changes in the behavior of financial and economic markets.  According
to Liew and Haron (2013), GDP influence significantly the rise of house price.
Higher GDP translates into every going high. As GDP, house price would growth
as the same path and this had bringing positive profit progressing to prime
construction industries and other side industries. Hence, this creates a back-
push force enhancing house price level to new high. Although economy growth
projecting slower path, but the GDP is still there increase concurrently the
average house price.

According to Guo and Wu (2013), high GDP and better
economic development push the rising exception of housing price ,which
increases housing demand, with the shortage of the housing supply, so that make
housing price rise. A large part of the GDP comes from the real estate
development and construction and its related real estate, the
over-concentration of finance and high-level quest for the construction
increase the added value of the housing, that push up prices. GDP increases,
the corresponding people’s per capita income will increase, so that enhance the
consumer’s consumption ability, in addition, pull price level higher, overall
prices then rise .A part of the GDP are used to urban infrastructure and
supporting facilities construction, various welfare building, bringing a
corresponding increase in the added value of commodity housing, it also push up
housing prices.


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