TTRP21-04 Sensitivity Analysis on Sydney's Urban Structure and House Prices for the 2021 NSW Intergenerational Report

This paper discusses two hypothetical scenarios to the Sydney housing market and total welfare.

The first scenario represents an increase in remote work, for example, as a structural shift in flexible work arrangements post the COVID-19 pandemic. The second scenario represents greater density in the CBD and inner suburbs, for example, as a result of relaxed building restrictions.

These scenarios have been prepared using the model underpinning the peer-reviewed academic paper - Urban Structure and Housing Prices: Some Evidence from Australian Cities. This is a variant of the AlonsoMuth-Mills model, calibrated to represent features of a large city. The model has been calibrated further for this paper to represent Sydney prior to the COVID-19 global pandemic.

The preliminary model outputs will be finalised and presented as part of the next NSW Intergenerational Report (IGR), to be released in 2021, and will support a broader discussion on the importance of effective planning regulations to sustainable growth. It will also provide the opportunity to explore some potential structural shifts resulting from the COVID-19 pandemic and associated government and business responses.