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Income Uncertainty, House Price Uncertainty and the Transition Into Home Ownership in the United Kingdom

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  • John Gathergood

Abstract

Using household panel data, this paper examines the impact of income uncertainty and house price uncertainty on home ownership in the United Kingdom. The existing literature based on cross-sectional studies finds a negative relationship between income uncertainty and home ownership. This paper utilises data on transitions into home ownership and exogenous variation in income uncertainty, avoiding the endogeneity of income to home ownership status. It also conditions the empirical estimates on a measure of house price volatility utilising a local-level house price index to control house price uncertainty, which might also discourage home ownership. Results show a strong role for income uncertainty in lowering the likelihood of house purchase, but no statistically significant role for house price uncertainty.

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File URL: http://www.nottingham.ac.uk/cfcm/documents/papers/09-07.pdf
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Paper provided by University of Nottingham, Centre for Finance, Credit and Macroeconomics (CFCM) in its series Discussion Papers with number 09/07.

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Handle: RePEc:not:notcfc:09/07

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Postal: School of Economics University of Nottingham University Park Nottingham NG7 2RD
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Keywords: Home ownership; income uncertainty; house price uncertainty.;

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  1. Sven Rady & François Ortalo-Magné, 2001. "Housing Market Dynamics: On the Contribution of Income Shocks and Credit Constraints," CESifo Working Paper Series 470, CESifo Group Munich.
  2. Diaz-Serrano, Luis, 2005. "On the negative relationship between labor income uncertainty and homeownership: Risk-aversion vs. credit constraints," Journal of Housing Economics, Elsevier, vol. 14(2), pages 109-126, June.
  3. Ortalo-Magne, Francois & Rady, Sven, 2002. "Tenure choice and the riskiness of non-housing consumption," Journal of Housing Economics, Elsevier, vol. 11(3), pages 266-279, September.
  4. Diaz-Serrano, Luis, 2005. "Labor income uncertainty, skewness and homeownership: A panel data study for Germany and Spain," Journal of Urban Economics, Elsevier, vol. 58(1), pages 156-176, July.
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