RDP 2015-08: Housing Wealth Effects: Cross-sectional Evidence from New Vehicle Registrations 3. Bivariate Analysis

Figure 3 shows a plot of the log change in per capita new passenger vehicle registrations between 2006 and 2011 against the log change in average house prices, for each postcode. In the figure, the size of the data points is proportional to the population of each postcode in 2006. The wide variation in house price growth across postcodes is highly informative for our analysis: unweighted average house price growth from 2006 to 2011 was 28 per cent, with a standard deviation of 11 per cent. However, the small number of postcodes experiencing a fall in average house prices between 2006 and 2011 limits the scope of the data to determine whether consumption responds asymmetrically to rises and falls in house prices.

The line of best fit shown in Figure 3 indicates that growth in per capita new passenger vehicle registrations was higher in postcodes experiencing relatively high house price growth. Each 1 percentage point increase in house prices is associated with a 0.24 per cent increase in per capita new passenger vehicle registrations. The regression shown in the first column of Table 3 indicates that this correlation is highly statistically significant.