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House Prices and Housing Investment in Sweden and the United Kingdom: Econometric Analysis for the Period 1970-1998

Author

Listed:
  • Barot, Bharat

    (National Institute of Economic Research)

  • Yang, Zan

    (Institute for Housing and Urban Research)

Abstract

We estimate quarterly dynamic housing demand and investment supply models for Sweden and the UK for the sample period 1970-1998, using an Error Correction Method (ECM). To facilitate comparisons of results between Sweden and the UK we model both countries identically with approximately almost the similar type of exogenous variables. The long run income elasticities for Sweden and the UK are constrained to be 1.0 respectively. The long runs semi-elasticity for interest rates are 2.1 and 0.9 for Sweden and the UK. The speed of adjustment on the demand side is 0.12 and 0.23 while on the supply side is 0.06 and 0.48 for Sweden respectively the UK. Granger causality tests indicate that income Granger causes house prices for Sweden, while for the UK there is also a feedback from house prices to income. House prices Granger cause financial wealth for Sweden, while for the UK it's vice versa. House prices cause household debt for Sweden, while for UK there is a feedback from debt. Interest rates Granger cause house prices for the UK and Sweden. In both countries Tobin’s q Granger cause housing investment. Generally the diagnostic tests indicate that the model specifications were satisfactory to the unknown data generating process.

Suggested Citation

  • Barot, Bharat & Yang, Zan, 2002. "House Prices and Housing Investment in Sweden and the United Kingdom: Econometric Analysis for the Period 1970-1998," Working Papers 80, National Institute of Economic Research.
    • Handle: RePEc:hhs:nierwp:0080
    Note: This paper is published in RURDS, Journal of the Applied Regional Science Conference, Vol. 14, No 2, July 2002.
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    6. Case, Karl E. & Quigley, John M. & Shiller, Robert J., 2003. "Home-buyers, Housing and the Macroeconomy," Berkeley Program on Housing and Urban Policy, Working Paper Series qt0v59r392, Berkeley Program on Housing and Urban Policy.
    7. Östblom, Göran & Ljunggren Söderman, Maria & Sjöström, Magnus, 2010. "Analysing future solid waste generation - Soft linking a model of waste management with a CGE-model for Sweden," Working Papers 118, National Institute of Economic Research.
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    10. Österholm, Pär, 2013. "Forecasting Business Investment in the Short Term Using Survey Data," Working Papers 131, National Institute of Economic Research.
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    12. Gren, Ing-Marie, 2003. "Monetary Green Accounting and Ecosystem Services," Working Papers 86, National Institute of Economic Research.
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    19. Karl E Case & John M Quigley & Robert J Shiller, 2003. "Home-buyers, Housing and the Macroeconomy," RBA Annual Conference Volume (Discontinued), in: Anthony Richards & Tim Robinson (ed.),Asset Prices and Monetary Policy, Reserve Bank of Australia.

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