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The Convergence of Regional House Prices in the UK

Author

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  • Steven Cook

    (Department of Economics, University of Wales Swansea, Singleton Park, Swansea, SA2 8PP, UK, s. cook@ swan. ac. uk)

Abstract

The ripple effect hypothesis implies a long-run convergence of regional UK house prices. However, despite many authors believing in the existence of such an underlying constancy, statistical evidence has yet to be presented supporting this implication. In this paper, an alternative approach is proposed to analyse regional house price ratios. In contrast to the findings of previous studies, application of this new procedure results in the detection of widespread convergence of house prices in a number of regions of the UK. The results suggest that the failure of previous analyses to uncover convergence is due to an underlying asymmetry in the adjustment process being ignored. Interestingly, the form of asymmetry detected varies between regions. While regions in the South East experience faster convergence following downswings in prices, other regions exhibit more rapid convergence following increases in prices.

Suggested Citation

  • Steven Cook, 2003. "The Convergence of Regional House Prices in the UK," Urban Studies, Urban Studies Journal Limited, vol. 40(11), pages 2285-2294, October.
    • Handle: RePEc:sae:urbstu:v:40:y:2003:i:11:p:2285-2294
    DOI: 10.1080/0042098032000123295
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    References listed on IDEAS

    as
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    Cited by:

    1. Guojie Ma, 2016. "Corporate Behaviour and Market Integration: Evidence from the Asia-Pacific Real Estate Market," PhD Thesis, Finance Discipline Group, UTS Business School, University of Technology, Sydney, number 3-2016, January-A.
    2. Todd Kuethe & Valerien Pede, 2011. "Regional Housing Price Cycles: A Spatio-temporal Analysis Using US State-level Data," Regional Studies, Taylor & Francis Journals, vol. 45(5), pages 563-574.
    3. Tsai, I-Chun & Chiang, Shu-Hen, 2019. "Exuberance and spillovers in housing markets: Evidence from first- and second-tier cities in China," Regional Science and Urban Economics, Elsevier, vol. 77(C), pages 75-86.
    4. George A. Matysiak & Krzysztof Olszewski, 2019. "A panel analysis of Polish regional cities: residential price convergence in the primary market," NBP Working Papers 316, Narodowy Bank Polski.
    5. Holmes, Mark & Grimes, Arthur, 2005. "Is there long-run convergence of regional house prices in the UK?," Motu Working Papers 292891, Motu Economic and Public Policy Research.
    6. Tsai, I-Chun, 2018. "House price convergence in euro zone and non-euro zone countries," Economic Systems, Elsevier, vol. 42(2), pages 269-281.
    7. Michael Funke & Petar Mihaylovski & Adrian Wende, 2018. "Out of Sync Subnational Housing Markets and Macroprudential Policies," CESifo Working Paper Series 6887, CESifo.
    8. Zohrabyan, Tatevik & Leatham, David J. & Bessler, David A., 2008. "Cointegration Analysis of Regional House Prices in U.S," 2007 Agricultural and Rural Finance Markets in Transition, October 4-5, 2007, St. Louis, Missouri 48138, Regional Research Committee NC-1014: Agricultural and Rural Finance Markets in Transition.
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    10. Bruce Morley & Dennis Thomas, 2011. "Risk-return relationships and asymmetric adjustment in the UK housing market," Applied Financial Economics, Taylor & Francis Journals, vol. 21(10), pages 735-742.
    11. John Muellbauer, 2019. "A Tale of Two Cities: Is Overvaluation a Capital Issue?," Springer Books, in: Rob Nijskens & Melanie Lohuis & Paul Hilbers & Willem Heeringa (ed.), Hot Property, chapter 0, pages 51-62, Springer.
    12. Shu-hen Chiang, 2014. "Housing Markets in China and Policy Implications: Comovement or Ripple Effect," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 22(6), pages 103-120, November.
    13. Ryan Greenaway‐McGrevy & Arthur Grimes & Mark Holmes, 2019. "Two countries, sixteen cities, five thousand kilometres: How many housing markets?," Papers in Regional Science, Wiley Blackwell, vol. 98(1), pages 353-370, February.
    14. Bruce Morley & Dennis Thomas, 2018. "Covariance Risk and the Ripple Effect in the UK Regional Housing Market," Review of Economics & Finance, Better Advances Press, Canada, vol. 13, pages 1-13, August.
    15. Haavio, Markus & Kauppi, Heikki, 2009. "House price fluctuations and residential sorting," Research Discussion Papers 14/2009, Bank of Finland.
    16. Nafeesa Yunus, 2019. "Dynamic Linkages Among U.S. Real Estate Sectors Before and After the Housing Crisis," The Journal of Real Estate Finance and Economics, Springer, vol. 58(2), pages 264-289, February.
    17. Gong, Yunlong & Hu, Jinxing & Boelhouwer, Peter J., 2016. "Spatial interrelations of Chinese housing markets: Spatial causality, convergence and diffusion," Regional Science and Urban Economics, Elsevier, vol. 59(C), pages 103-117.
    18. I-Chun Tsai, 2018. "The cause and outcomes of the ripple effect: housing prices and transaction volume," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 61(2), pages 351-373, September.
    19. Alqaralleh, Huthaifa & Canepa, Alessandra, 2020. "Housing market cycles in large urban areas," Economic Modelling, Elsevier, vol. 92(C), pages 257-267.
    20. Eleni Kyriazakou & Theodore Panagiotidis, 2014. "Linear and nonlinear causality in the UK housing market: a regional approach," Economics and Business Letters, Oviedo University Press, vol. 3(4), pages 288-297.
    21. Liu, Xiangling, 2019. "The income elasticity of housing demand in New South Wales, Australia," Regional Science and Urban Economics, Elsevier, vol. 75(C), pages 70-84.
    22. Wichita State University, 2016. "Contagion, Interdependence and Diversification across Regional UK Housing Markets," International Real Estate Review, Global Social Science Institute, vol. 19(3), pages 327-351.
    23. Hernán Enríquez Sierra & Jacobo Campo Robledo & Antonio Avenda�o Arosemena, 2015. "Relaciones regionales en los precios de vivienda nueva en Colombia," Revista Ecos de Economía, Universidad EAFIT, vol. 19(40), pages 25-47.
    24. Steven Cook & Dimitrios Vougas, 2009. "Unit root testing against an ST-MTAR alternative: finite-sample properties and an application to the UK housing market," Applied Economics, Taylor & Francis Journals, vol. 41(11), pages 1397-1404.
    25. Teye, Alfred Larm & Ahelegbey, Daniel Felix, 2017. "Detecting spatial and temporal house price diffusion in the Netherlands: A Bayesian network approach," Regional Science and Urban Economics, Elsevier, vol. 65(C), pages 56-64.

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