Property price dynamics and asymmetric effects of economic policy uncertainty: New evidence from the Australian capital cities

This paper examines the long-run relationship between residential property prices and economic policy uncertainty (EPU) in seven Australian capital cities. Using the panel nonlinear autoregressive distributed lag model, we analyse the asymmetric effect of EPU on Australian house and apartment (unit) prices over the period 2001-2021. The EPU is found to affect property prices negatively; however, the effects of the positive changes in EPU are larger than those of the negative changes in EPU. The evidence of asymmetric effects is particularly strong for unit prices. Our results reveal that interest rates, construction costs and housing loans also drive the long-run price trends.