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A housing market model for the metropolitan area of Ottawa-Hull

University of British Columbia

Much of the literature on the residential building industry pertains to studies that aggregate the national production of housing. Since land development, including housing, is restricted to a particular place, the author has attempted to model a local housing market and to estimate the relationship between the production of ground-oriented housing units in a specified market area and certain specified factors postulated to affect the supply and demand of the commodity. The housing market model has been based on the assumption that the number of dwelling starts responds proportionally to the desired number of units under construction, the opening level of such an inventory, and the number of completions. With respect to the desired number of dwelling units under construction, particular attention has been made to the estimation of the potential profitability of developing houses as well as the severity of credit conditions. An hypothesis was made of the effect of credit availability, or non-price credit terms, on housing starts; and, a model of the supply of new ground-oriented housing has been postulated with optional specifications for a credit conditions variable to identify the relationship with the important determining variables and to determine the effect of credit availability. The model was tested with estimates for all the dependent and determining variables for the Ottawa-Hull Metropolitan Area. Specifications of the model have been applied to data covering the period from 1968 to 1977, and multiple regression techniques have been used to estimate the coefficients of the explanatory variables. The performance of the housing starts model, including the use of the credit conditions variables, has been assessed on the basis of a number of measurements of the goodness of fit over the original ten year period as well as the following two year period (1978 and 1979). The testing of the housing starts model appeared to confirm the hypothesis that given a level of profitableness of developing land and the investment required per unit, developers would desire to maintain a certain number of units under construction. The study was generally successful in showing the relationship between the number of housing starts, in a limited market area, and the major determining variables attributed to the local and national economic environment. The credit conditions variables used appeared to successfully indicate the effect of the price and availability of credit, but there was little convincing evidence to support the hypothesis of the symmetric effect of credit availability in favour of a hypothesis of the asymmetric effect.

Text

2010-03-29

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http://hdl.handle.net/2429/22888

Business Administration

University of British Columbia

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