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Exuberance in the U.K. Regional Housing Markets

Research output: Working paper

Published
Publication date05/2017
Place of PublicationLancaster
PublisherLancaster University, Department of Economics
Original languageEnglish

Publication series

NameEconomics Working Paper Series

Abstract

We combine the estimation of a structural model with inference based on recently developed recursive unit root tests to analyse the behaviour of regional real estate markets in the U.K. over the last four decades. We find two episodes, the late 1980s and the early and mid-2000s, when all regional house prices experienced explosive dynamics above and beyond factors such as housing supply relative to demographics, income, regional spillovers and credit availability. This is the first econometric analysis to provide evidence that would endorse the view that ‘bubbles’, with a particular spatial pattern, are a feature of UK regional housing markets.