What Factors Determine Changes in House Prices and Rents?

2020 ◽  
pp. 39-56
Author(s):  
Geoffrey Meen ◽  
Christine Whitehead
Keyword(s):  
Interest Rates ◽  
House Prices ◽  
House Price ◽  
Empirical Work ◽  
International Standards ◽  
Macroeconomic Conditions ◽  
Price Trends ◽  
The Uk ◽  
Different Parts ◽  
Over Time

Whatever measure of affordability is used house prices and rents play a central role and Chapter 3 is concerned with what causes these two variables to change over time and vary across different parts of the country. Although increases in house prices have been particularly strong in the UK by international standards, other countries are also discussed. In fact, house price trends and volatility can be explained by a fairly small number of variables – and their influence has been remarkably consistent over the last fifty years. The problem has been rather that house prices are very sensitive to changes in incomes, interest rates and credit conditions and these vary greatly over time. Therefore, modest changes in macroeconomic conditions have disproportionate effects on housing. UK empirical work on market rents is less well-developed than for house prices, but the chapter considers the reasons why rents appear to have risen at a slower rate than house prices.

Regional economic divergence and house prices: a comparison of Germany and the UK

2019 ◽  
Vol 12 (4) ◽  
pp. 722-735
Author(s):  
Benedikt Blaseio ◽  
Colin Jones
Keyword(s):  
Human Capital ◽  
Housing Market ◽  
House Prices ◽  
House Price ◽  
Annual Data ◽  
Content Type ◽  
Economic Divergence ◽  
Price Trends ◽  
The Uk

Purpose Increasing regional wealth disparities have been explained by the role of agglomeration economies and the concentration of skilled mobile human capital. This paper aims to draw out the role of the housing market by considering the differential experience of Germany and the UK. Design/methodology/approach The empirical analysis is based on the comparison of regional house price trends in Germany and UK-based annual data from 1991 to 2015. Findings Regional house price inequality is found to have increased in both countries with the spatial concentration of skilled human capital. However, the main conclusion is that there are differential paths to regional house price inequality explained by the parameters of each country’s housing market. Originality/value The research is the first to compare and explain differential regional house price trends across countries.

LIBOR, base rate spreads and the UK housing market

2015 ◽  
Vol 8 (1) ◽  
pp. 118-134 ◽  
Author(s):  
Martin Hinch ◽  
Jim Berry ◽  
William McGreal ◽  
Terry Grissom
Keyword(s):  
Time Series ◽  
Interest Rates ◽  
House Prices ◽  
House Price ◽  
Base Rate ◽  
Percentage Change ◽  
Content Type ◽  
Change Models ◽  
The Uk ◽  
The Impact

Purpose – The purpose of this paper is to analyse how London Interbank Offered Rate Index (LIBOR) and the spread between LIBOR and the base rate of interest as set by the Bank of England (BoE) influences the variation in house prices in the UK. Design/methodology/approach – This paper uses monthly data over a long time series, since 1986, to investigate the relationships between house price and LIBOR. Data are drawn from several different sources to include housing, financial and macro-economic variables. The time series is sub-divided into a series of splines based on stages in the economic and property market cycle. Both value-based and percentage change models are developed. Findings – The results show that BoE base/LIBOR margin variable has a strong positive and significant effect on house price; however, the percentage change model infers a weaker and inverse relationship. The spline analysis re-emphasised the significance of the BoE base/LIBOR margin variable. Where variation between base rates and LIBOR is reduced, a significant positive effect can be observed in the average house price; however, where significant variation exists, the BoE base/LIBOR margin has little effect and LIBOR itself becomes a significant driver. Research limitations/implications – The results highlight that the predictive qualities of the BoE base/LIBOR margin, as the contribution of this margin to the explanation of house price, exceeds both the base rate and LIBOR variables individually. Also highlighted is the contribution of unemployment to the explanation of house price. In both the value and percentage change models, unemployment is shown as a negative and highly significant contributor. Originality/value – Previous papers have demonstrated the important linkage between house price and interest rates, the originality in this paper lies in examining the impact of LIBOR and the spreads between LIBOR and base rate as key variables influencing variation in UK house prices.

scholarly journals Liquidity, interest rates and house prices in the euro area: a DSGE analysis

2016 ◽  
Vol 9 (1) ◽  
pp. 4-25 ◽  
Author(s):  
Margarita Rubio ◽  
José A. Carrasco-Gallego
Keyword(s):  
Interest Rates ◽  
Monetary Union ◽  
Euro Area ◽  
House Prices ◽  
Housing Prices ◽  
House Price ◽  
Dsge Model ◽  
Content Type ◽  
The Core ◽  
Dynamic Stochastic

Purpose This study aims to build a two-country monetary union dynamic stochastic general equilibrium (DSGE) model with housing to assess how different shocks contributed to the increase in housing prices and credit in the European Economic and Monetary Union. One of the countries is calibrated to represent the core group in the euro area, while the other one corresponds to the periphery. Design/methodology/approach In this paper, the authors explore how a liquidity shock (or a decrease in the interest rate) affects house prices and the real economy through the asset price and the collateral channel. Then, they analyze how a house price shock in the periphery and a technology shock in the core countries are transmitted to both economies. Findings The authors find that a combination of an increase in liquidity in the euro area coming from the common monetary policy, together with asymmetric house price and technology shocks, contributed to an increase in house prices in the euro area and a stronger credit growth in the peripheral economies. Originality/value This paper represents the theoretical counterpart to empirical studies that show, through macroeconometric models, the interrelation between liquidity and other shocks with house prices. Using a DSGE model with housing, the authors disentangle the mechanisms behind these empirical findings.

Regional housing price dependency in the UK: A dynamic network approach

Urban Studies ◽  
2020 ◽  
pp. 004209802094348
Author(s):  
Dayong Zhang ◽  
Qiang Ji ◽  
Wan-Li Zhao ◽  
Nicholas J Horsewood
Keyword(s):  
Housing Market ◽  
House Prices ◽  
House Price ◽  
Housing Price ◽  
Dynamic Network ◽  
Network Approach ◽  
Market Interactions ◽  
Partial Correlations ◽  
Regional Housing Market ◽  
The Uk

The cross-regional dependency in the UK housing market is analysed using regional house price indices. In this article, a network approach based on partial correlations is proposed, along with rolling-window analysis to consider potential time-varying dependency. The results show that house prices in the outer South East region have the strongest influence on regional housing market interactions in the UK. This influence is stronger when the markets are highly interconnected, whereas the house prices in London have the strongest influence when the UK regional housing markets are relatively less connected.

The Interpretation of House Price Statistics for the United Kingdom

1981 ◽  
Vol 13 (9) ◽  
pp. 1109-1124 ◽  
Author(s):  
M C Fleming ◽  
J G Nellis
Keyword(s):  
United Kingdom ◽  
Critical Appraisal ◽  
House Prices ◽  
House Price ◽  
Price Inflation ◽  
The United Kingdom ◽  
Price Levels ◽  
Incomplete Coverage ◽  
The Uk

A survey is made of all official and unofficial sources of statistics on house prices in the UK. This is followed by a critical appraisal of the evidence they provide about national and regional price levels and about house price inflation. Attention is focused on two crucial factors: the representativeness of the data and the heterogeneity of houses. It is concluded that incomplete coverage of all house transactions means that most series tend to overstate price levels and that intertemporal and interregional comparisons are sensitive to the composition by type of houses traded.

High house prices may be global systemic risk

2016 ◽  
Keyword(s):  
Interest Rates ◽  
Household Income ◽  
House Prices ◽  
House Price ◽  
Content Type ◽  
Price Boom ◽  
Advanced Economies ◽  
The Us ◽  
Property Markets

Subject The rise in global house prices. Significance In the first quarter of 2015, the global house price index, aggregating prices in 52 countries, was at about the same level as in early 2007, according to IMF data. This recovery has occurred in a period of wage gains in most emerging markets (EMs), but little or no growth in household income across most advanced economies. Living costs excluding housing have stagnated and interest rates have been exceptionally low. Yet US interest rates are rising now and global prices are unlikely to keep falling beyond 2016, while many EMs have slumped into recession. As households are hit by more adverse trends, property markets and the related sectors will be affected. Impacts The EM house price boom will be curbed by slowing income growth and weaker economic prospects. High house-prices-to-household-income ratios and household debt might require the introduction of macroprudential tools. The US housing market will stay affordable compared to its long-term average and to Europe's.

Assessing Dutch housing cycle and near-term market prospects

2020 ◽  
Vol 13 (2) ◽  
pp. 257-270
Author(s):  
Arvydas Jadevicius ◽  
Peter van Gool
Keyword(s):  
Housing Market ◽  
House Prices ◽  
House Price ◽  
Future Market ◽  
Price Inflation ◽  
Content Type ◽  
Dutch Housing ◽  
The Usa ◽  
Near Term ◽  
The Uk

Purpose This study is a practice undertaking examining three main concerns that currently dominate Dutch housing market debate: how long is the cycle, will the current house price inflation continue and is housing market in a bubble. With national house prices reaching record highs across all major cities, future market prospects became a topic of significant debate among policymakers, investors and the populace. Design/methodology/approach A triangulation of well-established academic methods is used to perform investigation. The models include Hodrick-Prescott (HP) filter, volatility autoregressive conditional heteroskedasticity (ARCH approximation) and right tail augmented Dickey–Fuller (Rtadf) test (bubble screening technique). Findings Interestingly, over the years from 1985 to 2019 research period, filtering extracts only one Dutch national housing cycle. This is a somewhat distinct characteristic compared to other advanced Western economies (inter alia the UK and the USA) where markets tend to experience 8- to 10-year gyrations. Volatility and Rtadf test suggest that current house prices in most Dutch cities are in excess of historical averages and statistical thresholds. House price levels in Almere, Amsterdam, The Hague, Groningen, Rotterdam and Utrecht are of particular concern. Originality/value Retail investors should therefore be cautious as they are entering the market at the time of elevated housing values. For institutional investors, those investing in long-term, housing in key Dutch metropolitan areas, even if values decline, is still an attractive investment conduit.

scholarly journals A simple measure of beta-convergence revisited

Urban Studies ◽  
2020 ◽  
pp. 004209802096262
Author(s):  
David Gray
Keyword(s):  
Rank Order ◽  
House Prices ◽  
Cycle Phase ◽  
Mortgage Debt ◽  
Income Differentials ◽  
Price Distribution ◽  
Long Run ◽  
Sigma Convergence ◽  
The Uk ◽  
Over Time

Convergence among regions to long-run, non-zero income differentials is predicted by mainstream and alternative spatial theories. A variety of convergence, considered by Sala-i-Martin, focuses on the rank order over time. As some must be growing faster than others, intra-distributional mobility implies convergence of regions. A measure of this from Boyle and McCarthy is the trend in rank concordance. As it is a measure of similarity between a given distribution and other sample periods, we propose that Kendall’s criterion ranking coefficient, combined with concordance, provides better insight into intra-distributional mobility and convergence. Agreement with a distribution can be traced over a series to highlight the mobility over time. This has the advantage of revealing whether mobility entails converging from, reverting to or converging to an order. Although there are phases of sigma-convergence and divergence, what is found in an analysis of regional house prices is that the rank-order is little affected by cycle phase. In trend, the UK price distribution appears to converge to a hierarchy, corresponding better with a very large monocentric urban model or Zipf-type, than a core–periphery-type distribution of prices. The broadening of price spreads is likely to be facilitated by the liberalisation of finance seen elsewhere, and by an appetite for greater mortgage debt.

Is There an East European Housing Bubble?

2006 ◽  
Vol 6 (3) ◽  
pp. 1850094 ◽  
Author(s):  
Robert C. Shelburne ◽  
Jose Palacin
Keyword(s):  
Interest Rates ◽  
Foreign Currency ◽  
House Price ◽  
Special Treatment ◽  
Housing Bubble ◽  
Policy Options ◽  
East European ◽  
Economic Fundamentals ◽  
Price Trends ◽  
European Economies

This study examines residential house price trends in the East European economies. The data are described and evaluated in terms of their quality and reliability; both official data from national statistical offices and that compiled by real estate companies are used. Current prices are evaluated in terms of the economic fundamentals in the region including GDP growth rates, interest rates, rental prices, alternative asset prices, and the availability of mortgages. The role of foreign currency mortgages is given special treatment given their importance in a number of countries and the vulnerabilities they introduce. For some of the markets a more detailed description of price trends by region or type of property is provided. Comparisons with western markets are made where appropriate. Generally it is concluded that price increases have been quite significant but any over appreciation is difficult to evaluate given the very positive changes in the economic fundamentals. In addition to price trends, the implications of the changing institutional structure of these mortgage markets are explained along with the implications of the housing market developments for consumer spending, fiscal and monetary policy. The possibility of a housing bubble and bust is examined along with its implications for the economy; policy options to minimize this likelihood and its consequences are also explored with due consideration of the limitations on macroeconomic policy options given the constraints imposed by euro accession in a number of the countries.

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