To read the full version of this content please select one of the options below:

Regional house price cycles in the UK, 1978-2012: a Markov switching VAR

Rosen Azad Chowdhury (Centre for Housing Research, University of St Andrews, St Andrews, UK, and)
Duncan Maclennan (School of Management, University of St Andrews, St Andrews, UK)

Journal of European Real Estate Research

ISSN: 1753-9269

Article publication date: 28 October 2014

Downloads
761

Abstract

Purpose

This paper aims to use Markov switching vector auto regression (MSVAR) methods to examine UK house price cycles in UK regions at NUTS1 level. There is extensive literature on UK regional house price dynamics, yet empirical work focusing on the duration and magnitude of regional housing cycles has received little attention. The research findings indicate that the regional structure of UK exhibits that UK house price changes are best described as two large groups of regions with marked differences in the amplitude and duration of the cyclical regimes between the two groups.

Design/methodology/approach

MSVAR principal component analysis NUTS1 data are used.

Findings

The housing cycles can be divided into two super regions based on magnitude, duration and the way they behave during recession, boom and sluggish periods. A north-south divide, a uniform housing policy and a monetary policy increase the diversion among the regions.

Research limitations/implications

Markov switching needs high-frequency data and long time spans.

Practical implications

Questions a uniform housing policy in a heterogeneous housing market. Questions the impact of monetary policy on a heterogeneous housing market. The way the recovery of the housing market varies among regions depends on regional economic performance, housing market structure and the labour market. House price convergence, beta-convergence.

Originality/value

No such work has been done looking at duration and magnitude of regional housing cycles. A new econometric method was used.

Keywords

Citation

Azad Chowdhury, R. and Maclennan, D. (2014), "Regional house price cycles in the UK, 1978-2012: a Markov switching VAR", Journal of European Real Estate Research, Vol. 7 No. 3, pp. 345-366. https://doi.org/10.1108/JERER-02-2014-0014

Publisher

:

Emerald Group Publishing Limited

Copyright © 2014, Emerald Group Publishing Limited