Global capital markets,housing prices,and partisan fiscal policies

In recent years, global imbalances have channeled the excess savings of surplus countries toward the real estate markets of deficit countries. By consequence, the deficit countries that attracted lots of foreign capital experienced large run‐ups in house prices, whereas most surplus countries that exported capital exhibited flat or slow house price growth. We first use new house price data and a novel instrumental variable design to show the causal relationship between housing prices and capital inflows, particularly through debt bonanzas. We then argue that international capital flows affect the fiscal policy preferences of both voters and political parties by way of their impact on housing prices. Where capital inflows are large and housing prices are rising, we expect voters to respond by demanding both lower taxes and less publicly‐provided social insurance because rising house prices allow homeowners to self‐insure against income loss. In contrast, declining house prices produce greater demands for social insurance, particularly among those most exposed to housing market risk. We present evidence from two cross‐national surveys that supports these claims, as well as a “before and after” analysis of the housing crash in Eastern Europe. We also show that the connection between house prices and social policy also manifests itself in government spending outcomes, mediated by partisan control.     

Modelling UK house prices using cointegration: an application of the Johansen technique

This paper provides an econometric analysis of the long-term equilibrium determination of UK house prices using the relatively recent Johansen cointegration procedure. This long-term equilibrium specification is then utilized in order to estimate a parsimonious dynamic model for UK house prices.     

Detecting long‐run relationships in regional house prices in the UK

Recent developments in the analysis of cointegration in the presence of asymmetric adjustment are extended and applied to data on regional house prices in the UK. This extension is found to have a dramatic impact upon the results derived. In contrast to recent studies employing standard methods, allowance for the possibility of asymmetric behaviour results in the detection of a large number of long‐run relationships between house prices in different regions. A consistent pattern of asymmetric adjustment is observed, with reversion to equilibrium occurring more rapidly (slowly) when house prices in the South of England decrease (increase) relative to other regions. While the results derived support the existence of a ripple effect underlying the observed movements in regional house prices, the extent of cointegration uncovered casts doubt upon the recently proposed notion of weak segmentation in the UK housing market.     

Switching error-correction models of house prices in the United Kingdom

This paper develops error-correction models of real house prices in the UK in which the adjustment coefficient switches stochastically between a stable regime where disequilibrium correction takes place and an unstable regime where such a correction does not occur. The generating mechanism of the shifts is modelled as a Markov process with transition probabilities which are either time-invariant or depend on the extent to which the system is out of disequilibrium. Estimation of error-correction models for the UK reveals that the observed booms in real house prices are associated with an unstable regime. We also find that the probability that the system remains in an unstable regime decreases as deviations from equilibrium increase.     

Ripple effect in house prices and trading volume in the UK housing market: New viewpoint and evidence

This study adopts the data of house prices and trading volume in the overall UK housing market and in the housing markets in the 10 major regions in the UK to estimate the ripple effect in the trading activities in the housing markets. First, this study details why the ripple effect occurs in the housing market price and volume using static and cobweb dynamic models. The results of the panel-based unit root tests indicate that the relative price and volume ratios show constancy, signifying that long-run equilibrium relationships exist between the regional and national housing markets in the UK. The frequency of the transaction volume convergence behavior is higher than that of the overall house prices.     

Forecasting UK house prices: A time varying coefficient approach

Previous studies of UK house prices, developed from the demand and supply ofhousing or from the asset market approach have been poor in terms of robustness and ex-post forecasting ability. The UK housing market has suffered a number of structural changes, particularly since the early 1980s with substantial house price increases, financial market deregulation and the removal of mortgage market constraints through competition. Consequently, models which assume that the underlying data-generating process is stable and apply constant parameter techniques tend to suffer in terms of parameter instability. This article uses the Time Varying Coefficient (TVC) methodology where the underlying data-generating process in the UK housing market is treated as unstable. The estimation results of the TVC regression of UK house prices is compared with those obtained from three alternative constant parameter regressions. Comparisons of forecasting performance suggest the TVC regression out-performs forecasts from an Error Correction Mechanism (ECM), Vector Autoregressive (VAR) and an Autoregressive Time Series regression.     

Bubbles in UK house prices: evidence from ESTR models

Recent movements in stock and house prices have led to an examination of the presence of bubbles. Whilst, there is extensive research on stock price data, there is relatively less for house prices. This paper uses a present‐value model for house prices to test for the presence of bubbles. The results support the presence of a non‐fundamental component within UK national and regional house prices. In particular, for the majority of series considered, evidence is presented of linear non‐stationarity within the fundamental present‐value relationship, and of non‐linear stationarity, implying the presence of a non‐fundamental, or bubble, component. Furthermore, evidence is presented that prices adjust quicker when they are below fundamental equilibrium, than when they are above fundamental equilibrium, i.e. there is downward price stickiness. These results support the hypothesis that house price dynamics can be characterised by price‐to‐price momentum. Finally, forecast evidence suggests that real prices are likely to adjust downwards and converge with fundamental value.     

Fertility and female wages: A new link via house prices

The analysis in this paper explains a new link between fertility and female wages that occurs through the effect of house prices. It is well known that higher female wages have an ambiguous effect on fertility: the positive income effect is offset by a negative substitution effect due to the higher opportunity cost of the maternal time required for child-rearing. Here it is shown that housing costs add a new dimension to this relationship. If the housing needs of children are a sufficiently important cost of child-rearing, then other costs of child rearing such as the opportunity cost of maternal time are rendered relatively less important. Hence the negative substitution effect of higher female wages on fertility is weaker, implying that higher female wages are more likely to boost fertility. This effect is stronger when the housing supply elasticity is high since house prices, and hence the costs of children, are kept in check. The analysis here helps to reconcile empirical observations about fertility, female wages and house prices in a number of countries. For governments concerned about low fertility, policies to increase housing supply elasticity in order to keep house prices in check would be helpful.     

Canadian city housing prices and urban market segmentation

Abstract .  This paper provides a detailed empirical analysis of Canadian city housing prices. We examine the long-run relationship between city house prices in Canada from 1985 to 2005 as well as idiosyncratic relations between city prices and city-specific variables. The results suggest that city house prices are only weakly correlated in the long run and that there is a disconnect between house prices and interest rates. City-specific variables such as union wage levels and the issuance of building permits tend to be positively related to existing city house prices. Surprisingly, there is mixed evidence with respect to standard measures of economic activity such as per capita GDP and interest rates.     

Population and house prices in the United Kingdom

Real house prices rise in the United Kingdom amid growing concern of an impending correction. The rate of household formation has increased with strong population growth, due to elevated rates of natural increase and net migration, and lack of growth in average household size, due to a rise in single‐person households with population ageing. This paper presents an overlapping generations model of housing, endogenous labour, savings and growth to analyse the effect of an increase in the household formation rate and speculative demand under rational expectations on house prices in a general equilibrium. We find that real house prices rise over time if the rate of household formation outstrips the rate of housing supply, but do not follow a speculative bubble path in the long run. The results explain why the upward trend in real house prices reflects market fundamentals and has continued despite population ageing as the number of working and retired households grows relative to the number of older people seeking to sell.     

Convergence and spillover of house prices in Chinese cities

The issue of house price convergence in 34 Chinese cities is investigated. We augmented the convergence model with contemporaneous spatial dependence in house prices and found that price convergence and positive spatial spillover are both present. We explicitly addressed the endogeneity problem by introducing a Bayesian instrumental variable setup, which was estimated with particle filtering techniques. From a growth poles perspective, the empirical evidence indicates that the spread effect in regional house prices outweighs the backwash effect. The identified positive spatial spillover has two effects on the growth of house prices in Chinese cities. First, the spillover elevates the trajectories of the steady-state growth paths of house prices. Second, the spillover narrows the gaps between the growth paths of house prices in neighbouring cities. Shocks to the socio-economic variables of a city generate their own effects on domestic house prices that dominate the effects arising from cross-city price feedbacks, thus mitigating the prospect of level convergence. Our findings also suggest a collaborating role between time and spatial dependence parameters. The identification of inter-city spillover, which is a conditioning factor for regional house price convergence, offers implications to policies that are most likely to be effective in reducing regional disparity.     

Monetary policy,corporate profit and house prices

By using portfolio theory, we explain the highly observed correlation between the seemingly unrelated corporate profit and house prices in the United States. We test the predictions of the underlying model using a vector autoregression representation and find the data to be supportive of the theory. Monetary impulses explain high correlation as both corporate profit and house prices exhibit similar dynamics in response to a monetary impulse. Robustness checks are presented by using the federal funds rate instead of the monetary base as a measure of the stance of monetary policy and by using other model variations. In all cases, the results are robust.     

Wages and prices in Europe before and after the onset of the Monetary Union

This paper investigates possible structural changes induced by the Euro on the relations among wages, prices and unemployment for the five major European economies. The dynamic adjustment and the level relations are found to be different across subperiods as well as across countries. During the European Economic and Monetary Union (EMU) period, there is evidence of a conventionally-sloped Phillips Curve for the four economies within the EMU, with a higher degree of homogeneity with respect to the pre-EMU period; the UK presents instead a positively-sloped Phillips Curve in the EMU period. In this latter period, deviations from reference values are found to influence unemployment for all countries, including the UK. Only for Germany and Spain, instead, we find evidence that deviations from reference values influence inflation dynamics.     

House prices,credit and the effect of monetary policy in Norway: evidence from structural VAR models

This paper investigates the responses of house prices and household credit to monetary policy shocks in Norway, using Bayesian structural VAR models. The analysis indicates that the effect of a monetary policy shock on house prices is large, while the effect on household credit is muted. This is consistent with a relatively small refinancing rate (refinancing rate refers to the share of outstanding mortgages that are refinanced each period due to changes in, for example, house prices or interest rate) of the mortgage stock each quarter. Using monetary policy to guard against financial instability by mitigating property-price movements may prove effective, but trying to mitigate household credit may prove costly in terms of GDP and inflation variation.     

Financial infrastructure and house prices

We argue that banks operating in a local market possess better information about the local housing market than do nonlocal banks. Possessing this information may influence their willingness to grant loans to house buyers and the specifics of the loan terms, which in turn may affect house prices because credit facilitation makes the housing market more efficient. Using a panel data set covering a period from 1993 to 2007 and involving 274 municipalities in Sweden, we establish a positive causal influence of local bank presence on local house prices. There are significant spatial and spillover effects, that is, banks in a municipality affect the housing markets in neighbouring municipalities, although to a lesser extent than in their own municipality. Similar results are obtained through a gravity model. The results are robust over time and municipality size.     

货币政策对房价的影响：一个文献综述

通过文献资料法和比较分析法，评述有关货币政策对房价影响的研究方法与研究结论。研究成果：（1）房价与利率问题正日益受到各界关注；（2）房价与利率的关系，学者之间研究的结论不相同，有的学者认为利率对房价产生影响，有的学者认为利率对房价没有影响。研究启示：货币政策与房价的关系还需进一步研究，调控政策还需要不断地完善。     

Measuring the impact of crime on house prices

This paper uses data on over 2800 house sales in Jacksonville, FL to estimate the impact of crime on house prices. A GIS programme is used to develop neighbourhood characteristics that are unique to each observation. Crime data, available for 89 police beats are assigned to each observation. Weighting the seriousness of offences by the cost of crime to victims is used as an alternative to the customary measures of the number of index crimes. The cost of crime has virtually no impact on house prices overall, but homes are highly discounted in high crime areas.     

The risk of falling house prices in Italy

This paper shows that Italian house market is less exposed to price shocks than the American one. Variations in the house price index in real terms have been studied along with the affordability ratio and the relation between house prices and rent levels for the period 1995–2004 in Italian provinces. Comparison with US data reveals greater overpricing in the US during the expansion phase (2000–2004). Although a speculative bubble in all US metropolitan areas considered does not emerge, US financial and economic structural factors make the US real estate sector more exposed to price shocks. To test the compatibility of Italian house prices with fundamentals an econometric model is designed to analyze the provincial house prices from 1995 to 2003.     

The changing role of house price dynamics over the business cycle

In this paper, we attempt to analyse the relationship between house price dynamics and the business cycle. Employing a time-varying transition probability Markov switching framework, we provide empirical evidence that house price growth may prove a useful leading indicator for turning point detection. Focusing on three countries, the US, UK and Spain, we furthermore provide evidence that although potentially informative from an overall perspective in business cycle modelling, the significance of signals contained in house prices may not be symmetric across the identified high growth and low growth states. In addition, we suggest a possible range of values for house price deflation which may trigger a recession the following period.     

The impact of speculation on house prices in the United Kingdom

When house prices are expected to rise, the representative house mover has an incentive to secure his purchase price (i.e. exchange contracts) on the ‘new’ house before exchanging contracts on the sale price on his ‘old’ house. If all house-movers adopt this stance, the imbalance between buyers and sellers causes a self-fulfilling speculative price bubble. Transactions costs do not represent a barrier to such speculation in the house market, as such costs can be considered as being sunk costs for first-time buyers and owner-occupiers intending to move for non-speculative reasons. This idea is formalised and empirical evidence is presented which suggests that speculation is a significant determinant of house prices in the United Kingdom.