Regional house price cycles in the UK, 1978-2012: a Markov switching VAR. Issue 3 (28th October 2014)

• Record Type: Journal Article
• Authors: Azad Chowdhury, Rosen; Maclennan, Duncan
• Editors: Gibb, Kenneth; Marsh, Alex
• Is Part Of: Journal of European real estate research. Volume 7:Issue 3(2014)
• Page Start: 345
• Page End: 366
• Publication Date: 2014-10-28
• Subjects: Housing cycles -- Markov switching -- Regional housing system; Real property -- Economic aspects -- Europe -- Periodicals; Commercial real estate -- Europe -- Periodicals; Housing -- Finance -- Periodicals; Housing -- Europe -- Periodicals; 333.5068
• DOI: 10.1108/JERER-02-2014-0014
• Languages: English
• ISSNs: 1753-9269

Abstract

Abstract : Purpose: – This paper aims to use Markov switching vector auto regression (MSVAR) methods to examine UK house price cycles in UK regions at NUTS1 level. There is extensive literature on UK regional house price dynamics, yet empirical work focusing on the duration and magnitude of regional housing cycles has received little attention. The research findings indicate that the regional structure of UK exhibits that UK house price changes are best described as two large groups of regions with marked differences in the amplitude and duration of the cyclical regimes between the two groups. Design/methodology/approach: – MSVAR principal component analysis NUTS1 data are used. Findings: – The housing cycles can be divided into two super regions based on magnitude, duration and the way they behave during recession, boom and sluggish periods. A north-south divide, a uniform housing policy and a monetary policy increase the diversion among the regions. Research limitations/implications: – Markov switching needs high-frequency data and long time spans. Practical implications: – Questions a uniform housing policy in a heterogeneous housing market. Questions the impact of monetary policy on a heterogeneous housing market. The way the recovery of the housing market varies among regions depends on regional economic performance, housing market structure and the labour market. House price convergence, beta-convergence. Originality/value: – No such work has been done looking at duration and magnitude of regional housing cycles. A new econometric method was used.