Explaining UK house price inflation 1971–89

An econometric analysis of UK house price inflation and changes in residential construction is presented for the period 1971–89, paying particular attention to the supply side of the housing market. The results of this analysis are used to examine the contributions of the various factors to the nominal rate of house price inflation. While the results confirm the importance of real disposable income in determining house prices, they indicate that supply variables may be of greater importance than interest rates in this respect. There are close similarities between the three housing booms of the 1970s and 1980s.