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This paper explores the properties of dynamic aggregate housing models. In conventional models, in response to demand shocks the primary adjustment mechanism is through prices and changes in housing supply. However, the size of the supply response depends on the price elasticity of supply and in countries such as the UK where the elasticity is low, house prices can rise sharply, worsening affordability. But this ignores the roles of housing risk and credit markets which affect the user cost of capital and the paper demonstrates that models that explicitly introduce a housing risk premium have an additional price stabiliser. The importance is shown through stochastic simulations; these simulations also demonstrate that conventional models used for forecasting and policy analysis may overstate future house price growth. [ABSTRACT FROM AUTHOR]

Much of mainstream economic analysis assumes that markets adjust smoothly, through prices, to changes in economic conditions. However, this is not necessarily the case for local housing markets, whose spatial structures may exhibit persistence, so that conditions may not be those most suited to the requirements of modern-day living. Persistence can arise from the existence of transaction costs. The paper tests the proposition that housing markets in Inner London exhibit a degree of path dependence, through the construction of a three-equation model, and examines the impact of variables constructed for the 19th and early 20th centuries on modern house prices. These include 19th-century social structures, slum clearance programmes and the 1908 underground network. Each is found to be significant. The tests require the construction of novel historical datasets, which are also described in the paper. [ABSTRACT FROM PUBLISHER]

This study is concerned with two issues: first, the factors that determine the local location decisions of migrants within the UK and, second, the impact of migrant communities on domestic housing markets. Most migration studies are concerned with the determinants of international migration to the UK. Few look at the drivers of the spatial distributions once migrants arrive. However, migrant housing is primarily a local, urban problem and, arguably, the main issue is the spatial concentrations, rather than absolute numbers. The UK has experienced waves of migrants throughout its history and these are well documented in the censuses since the mid 19th century. A feature of the study is its long-run perspective, which allows the examination of the characteristics of the different waves and shows the high degree of persistence in spatial structures. The second part of the study examines why there is little evidence that migration has much effect on house prices, despite the popular perception that the impact is important. The study demonstrates that the nature of housing market adjustment is more complex than price indicators alone would suggest. Adjustment also takes place through changes to household formation and through the mobility of domestic residents, which mitigate the price effects. [ABSTRACT FROM AUTHOR]

As a result of the recommendations of the Barker Review of Housing Supply in 2004, the Department of Communities and Local Government in England commissioned the construction of an econometric model of regional housing markets in order to examine the effects of different levels of housing construction on long-run affordability. The model has been regularly used as part of the policy-making process in England. The paper describes the structure of the model, which includes sectors covering house prices, household formation, tenure, migration flows, demographics and labour markets. Furthermore, through simulation analysis, the paper examines some of the key policy questions that have occurred in UK housing in recent years. [ABSTRACT FROM AUTHOR]

Unsurprisingly, a great deal of attention has been paid to the economic consequences of the credit crunch. However, this paper shows that the credit crunch was preceded by a strong build-up of mortgage debt internationally, which, in the long run, could turn out to be more significant than the credit crunch itself. Indeed, the debt build-up suggests that the credit crunch is more likely to reoccur, because highly-indebted households have weaker buffers to withstand unexpected shocks to their incomes or to interest rates. The paper presents a model that can explain the debt build-up and changes to the distribution of debt between existing owners and first-time buyers, which hinders access to home-ownership for the latter, even amongst those households who would be considered as credit-worthy. [ABSTRACT FROM AUTHOR]

Abstract: This paper re-examines one of the key parameters in housing economics – the price elasticity of housing supply. In the international literature, there is little agreement on its value or even on the appropriate methodology for its measurement. The paper argues that different spatial scales capture different aspects of the problem and, therefore, there is merit from comparing results at international, national, local and firm level. Using standardised models, there is evidence that the responsiveness of housing supply to market conditions is lower in Britain than in the US or Australia. However, supply is more responsive to the change in house prices than their level. With exceptions, most past research on supply in Britain concentrates on the national or regional dimensions. The paper finds that there are also insights to be obtained from examining local and firm level data. Local estimation across the Thames Gateway shows the importance of planning constraints on supply elasticities, but historical patterns of land use and geography are also important. Firm level data indicate that supply elasticities are greater for large firms than for small firms. [ABSTRACT FROM AUTHOR]

This paper considers how local areas become stuck in poverty traps and develops models exhibiting thresholds, where deprivation has to fall to a certain level before taking off. Using aggregate data for local authorities, the paper models cross-section movements of house prices to identify the threshold level of poverty. The paper argues that the resource requirements for bringing the most deprived areas to the take-off point are likely to be high. But for areas that are already close to the threshold, regeneration can be successful. Therefore, identifying the thresholds is important. Testing for thresholds is not straightforward, but the paper provides empirical evidence. The implications for policies concerned with social mixing are not encouraging. However, mixing may be more successful in areas that lie close to the threshold. For example, few high-income households want to live in the most deprived areas if the expected capital gains are low. But capital gains are maximised close to the take-off points. [ABSTRACT FROM AUTHOR]

In this article, Geoff Meen discusses patterns of economic segregation in England. Despite the emphasis that the government places on reducing segregation, patterns have, in fact, remained remarkably constant over, at least, the last twenty years. Dynamic changes in housing markets and migration over time help to explain these patterns, and evidence is presented on the extent to which house prices in certain local authorities have been under- or over-valued. The analysis also shows that, at the local level, housing markets exhibit non-linear behaviour, which hinders the effectiveness of housing policy in the most deprived areas and adds to economic segregation. [ABSTRACT FROM AUTHOR]

This paper constitutes the first of two interrelated studies and is concerned with the relationship between house prices and transactions. Using aggregate time–series data, we find a strong relationship in Britain between the two variables, but the relationship changed during the 1990s. Transactions became much lower. We suggest that structural changes in macroeconomic relationships are increasingly likely to occur in a world of greater inequality and our results are one symptom. We argue that macroeconomic estimation needs to be complemented by careful microeconomic analysis. The second study, also appearing in this issue, therefore examines the microeconomic aspects of the issue. [ABSTRACT FROM AUTHOR]

At first sight, data on real house prices in the U.S.A. and the U.K. appear to suggest that behavior has differed over time in the two countries at both the national and subnational levels. Furthermore, empirical estimates of the main house price elasticities in the literature appear to differ. In this paper, we ask whether the differences are really as great as previous work suggests. We argue that, by adopting a common methodological framework, the same theory can explain behavior in both countries. Also, there are important similarities in subnational house price trends that are not immediately evident from inspection of the data. [Copyright &y& Elsevier]

1999 saw the return of large scale mortgage equity - ie mortgage borrowing to finance consumption rather than house purchase - for the first time for a decade. Recent developments of the OEF macroeconometric model of the UK economy have focused on the determination of mortgage lending, looking in particular at the impact of downpayment constraints - ie the deposit borrowers have to put down when they buy a house. In this article, Geoffrey Meen uses this model to analyse the effects of mortgages on: (i) the cycle in the UK housing market at a national level; (ii) regional house price differentials; and (iii) aggregate savings and consumer behaviour. [ABSTRACT FROM AUTHOR]

Examines the aggregate housing market implications of labor market change in Great Britain. Structural change and the nature of labor and credit market constraints; Nature of aggregation conditions; Aggregate structural change in national house prices in the 1990s; Labor market change and post-1990 house prices.

Explores the nature of spatial interactions in Great Britain regional house prices and housing starts using methods taken from the spatial econometrics literature and from cointegration. Extent to which markets are homogeneous, dependent and convergent across the English regions; Spatial dependence in terms of house prices and starts; Housing since the early 1970s.

The article examines the effects of mortgage rationing on the level of housing demand and house prices in Great Britain. It derives the housing user cost of capital in the absence of credit market constraints. The article also discusses how inflation affects house prices. The effects of a change in the inflation rate on the mortgage market and nominal interest rates are examined. The article specifies a model to determine real house prices and results are presented.