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Exuberance in the U.K. Regional Housing Markets

Author

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  • Efthymios Pavlidis
  • Ivan Paya
  • David Alan Peel
  • Alisa Yevgenyevna Yusupova

Abstract

We combine the estimation of a structural model with inference based on recently developed recursive unit root tests to analyse the behaviour of regional real estate markets in the U.K. over the last four decades. We find two episodes, the late 1980s and the early and mid-2000s, when all regional house prices experienced explosive dynamics above and beyond factors such as housing supply relative to demographics, income, regional spillovers and credit availability. This is the first econometric analysis to provide evidence that would endorse the view that ‘bubbles’, with a particular spatial pattern, are a feature of UK regional housing markets.

Suggested Citation

  • Efthymios Pavlidis & Ivan Paya & David Alan Peel & Alisa Yevgenyevna Yusupova, 2017. "Exuberance in the U.K. Regional Housing Markets," Working Papers 168117137, Lancaster University Management School, Economics Department.
  • Handle: RePEc:lan:wpaper:168117137
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    References listed on IDEAS

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    Cited by:

    1. Pavlidis, Efthymios & Martínez-García, Enrique & Grossman, Valerie, 2019. "Detecting periods of exuberance: A look at the role of aggregation with an application to house prices," Economic Modelling, Elsevier, vol. 80(C), pages 87-102.
    2. Xie, Zixiong & Chen, Shyh-Wei & Wu, An-Chi, 2019. "Asymmetric adjustment, non-linearity and housing price bubbles: New international evidence," The North American Journal of Economics and Finance, Elsevier, vol. 50(C).
    3. Taufiq Choudhry, 2020. "Economic Policy Uncertainty and House Prices: Evidence from Geographical Regions of England and Wales," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 48(2), pages 504-529, June.
    4. Martínez-García, Enrique & Grossman, Valerie, 2020. "Explosive dynamics in house prices? An exploration of financial market spillovers in housing markets around the world," Journal of International Money and Finance, Elsevier, vol. 101(C).

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    More about this item

    Keywords

    Regional house prices; Structural housing model; Cointegration; Generalised supremum ADF; Speculative bubbles;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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