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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]

The Barker Review of Housing Supply was set up in order to address some of the weaknesses that might arise if the UK were to join EMU. The Final Report has quickly become one of the most important documents in housing policy for many years. Broadly, the Review examined the reasons for the weakness of English housing supply. For example, during the 1990s, despite the boom in house prices, private housing construction hardly grew at all. The weakness of supply is one reason why house prices in the UK have risen much faster than the European average. In response to the Review's conclusion that the land-use planning system is the main cause of supply shortages, England will be introducing affordability targets. Regional planning authorities will be required to release more land if they expect targets not to be met. Economic analysis and models will become central to the assessment. The Barker Review provides a good example of how economic analysis can be used to inform the policy debate. This paper looks at the economics underlying the Barker Review, concentrating on an analysis of supply elasticities and the required increases in construction to meet price targets. The latter has been particularly controversial since, under some assumptions, the analysis implies that housing construction in England needs to be approximately doubled in order to bring house price inflation down to European levels. [ABSTRACT FROM AUTHOR]

Most empirical analysis of property development treats the subcomponents of the construction industry as independent. For example, models of housing construction typically do not consider any relationship with industrial or commercial construction. In fact, there are a number of ways in which changes over time may be interdependent. For example, economic theory suggests that, under some conditions, housing investment crowds out industrial and commercial investment. In general, therefore, if there are interdependencies, the presumption is that the relationship is negative. Here the relationship between new housing and industrial construction is concentrated on. It is found that, in the long run, based on Johansen tests for Britain since the sixties, the relationship is positive – movements are complementary. At first sight, this result is counter-intuitive, at least in an aspatial setting. But, in a spatial setting, the results are consistent with the view that (i) 'jobs move to workers' as relocating firms seek out highly skilled workers who, in turn, search for high quality housing locations; (ii) particularly in SE England, which has a high rate of new firm formation, fast growing new firms are started by high potential entrepreneurs close to where they live. Therefore, new housing and industrial development are self-reinforcing. [ABSTRACT FROM AUTHOR]

Examines issues related to housing economics in Great Britain. Creation of a model of housing market; Components of the housing market model; Use of the model in assessing housing market efficiency; Relationship between house prices and property transactions; Role of monetary policy in the generation of housing cycles and stability.

In Britain, house prices exhibit a distinct spatial pattern over time, rising first in a cyclical upswing in the south-east and, then, spreading out over the rest of the country. This is known as the ripple effect. Although previous studies have shown that, statistically, the ripple effect is a valid representation of the data, providing convincing economic explanations is less straightforward. Some studies have concentrated on the role of migration; others argue that the pattern reflects different regional growth rates. This paper suggests that structural differences in regional housing markets are important. A new model of house prices for the regions in Great Britain is devised and estimated in which the coefficients exhibit non-random spatial patterns. The coefficients reflect structural differences between the regions and it is shown, through simulations, that the model can generate a ripple effect irrespective of regional growth patterns. [ABSTRACT FROM AUTHOR]

According to recent official projections, 4.4 million new households will be formed in England between 1991 and 2016. These estimates are based on a detailed analysis of demographic trends, but take no account of the effect of potential changes in economic conditions, particularly on the owner-occupancy rate. In this paper, we propose a new approach to modelling sustainable owner-occupancy which places less emphasis on demographics, but considers in more detail the role of market mechanisms through changes in house prices and rates of new construction. [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.