Paper: arXiv 2604.18605

Authors: Grace Burtenshaw, Ashley Burtenshaw, Meagan Carney

Abstract

In recent years Australia has observed a growing, unexplained resilience of increasing house price trends. Here, we seek to understand what is driving Australia’s indestructible asset using insights from market experts. We construct a differential equation model of house price to develop intuition for its historical behaviour and responsiveness to changes in mortgage rates. Using this model, we identify a point of ‘decoupling’ between house price and mortgage rate in the system with supply limitations found to be the main driver for this change. From there, modern extreme value techniques are implemented on real-world data to investigate how the effectiveness of mortgage rate in moderating extreme house price has changed before and after this historical decoupling. We find that without an increase in the housing supply chain, through either deregulation or reduced competition with government building, an 11% increase in mortgage rate will be needed to slow extreme housing costs.

Complexity vs Empirical Score

  • Math Complexity: 5.5/10
  • Empirical Rigor: 6.0/10
  • Quadrant: Holy Grail — high math complexity, high empirical rigor

Why this score: The paper presents an interesting blend of dynamic differential equation modeling and modern Extreme Value Theory (EVT) applied to macroeconomic housing market trends. While the empirical validation uses real-world Australian data, further transparency on data sources and code implementation would improve its reproducibility.

Research Flowchart

  flowchart TD
    A[Goal: Identify Drivers of Extreme Housing Prices & Asset Resilience in Australia] --> B[Inputs: Real-World Housing Data & Expert Market Insights]
    B --> C[Construct Differential Equation Model of House Prices vs. Mortgage Rates]
    C --> D[Identify Historical 'Decoupling Point' Driven by Supply Limitations]
    D --> E[Apply Modern Extreme Value Theory Pre- and Post-Decoupling]
    E --> F[Outcome: Supply Bottlenecks Need Fixing OR +11% Mortgage Rate Hike to Moderate Extreme Prices]

Cited References (20)

  1. Housing (2024) — link
  2. Australia’s Housing Shortage: Demand Outstripping Supply (2024) — link
  3. Why the Housing Crisis is Such a Wicked Problem (2025) — link
  4. Rent control effects through the lens of empirical research: An almost complete review of the literature (2024) — link
  5. Inflation falls to 3.4pc, eases pressure on RBA for rate rise (2026) — link
  6. Our Carrie Bradshaw Index Shows Australia’s Housing is in Crisis (2025) — link
  7. Lowest Building Approvals in Over a Decade Challenge Housing Ambitions (2024) — link
  8. Australian Houses are Less Affordable Than They Have Been in Decades (2024) — link
and 12 more
  1. Economic Analysis of Queensland Residential Renting Reforms (2020) — link
  2. The Use of Derivatives by Australian Property Funds (2011) — link
  3. Rent Control According to Seinfeld (2021) — link
  4. The Effects of Rent Control Expansion on Tenants, Landlords, and Inequality (2019) — link
  5. Contagion or Decoupling? Evidence from Emerging Stock Markets (2025) — link
  6. Decoupling in International Business: Evidence, Drivers, Impact, and Implications for IB Research (2023) — link
  7. Decoupling Theory: A Study of Global Markets in the Present Era (2020) — link
  8. The Price Responsiveness of Housing Supply in OECD Countries (2013) — link
  9. Reconceptualising Resilience in Housing Policy: An Actor-Network Approach (2024) — link
  10. Housing Market Bubbles and Urban Resilience (2020) — link
  11. A Model of the Australian Housing Market (2019) — link
  12. An Introduction to Statistical Modeling of Extreme Values (2001)

0 of 20 cited works are in the corpus; resolved via arXiv source bundles, Semantic Scholar and OpenAlex. Corpus-wide: 2518 linked papers.