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Investor Sentiment and Property Prices: The Relationship between Sentiment and Auckland Property Prices

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Dissertation(675.66 KB)

Date

2019

Authors

Supervisor

Gilbert, Aaron

Item type

Dissertation

Degree name

Master of Business

Journal Title

Journal ISSN

Volume Title

Publisher

Auckland University of Technology

Abstract

A body of literature has shown that investor sentiment has a role in influencing financial asset prices. This dissertation will investigate the role of sentiment, as measured by the tone of media articles, on aggregate property prices in Auckland. For many people, media reports represent their main source of financial information. The tone of those articles presumably can influence the view of investors, and their ultimate actions, in terms of their willingness to transact and the price they are willing to pay. Past literature surrounding media sentiment is used to develop a media sentiment index, which does not currently exist in NZ, for the Auckland property market over a five-year period from 2014-2019. I will seek to investigate the relationship between the media sentiment index, investor sentiment index and ASB sentiment index and whether these phenomena effects changes in aggregate property prices. I expect that there will be a strong correlation between media sentiment and property prices in Auckland. Bullish media sentiment is likely to encourage investors to participate in the market to secure capital gains, encouraging speculative behaviour and therefore driving up property prices at a faster rate. Likewise, negative media sentiment, as marked by stories talking about falling prices or slower sales, may reduce demand and so slow property price changes. My results show housing media sentiment has an insignificant relationship with house prices, yet has a positive correlation with investor sentiment. When testing the relationship between investor sentiment and changes in house prices, the results showed a statistically significant positive relationship, however, when testing the effect media sentiment has on investor sentiment, due to limitations, I cannot definitively say whether investor sentiment proxied through media influences property prices.

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Keywords

Sentiment, Property prices, Auckland, Media sentiment

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DOI

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Permanent link

https://hdl.handle.net/10292/13022

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Masters Dissertations