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Regional unemployment and house price determination

  • Qingyu, Zhu
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    This paper investigates the effect of unemployment on house prices in the UK property market to give an indication of the nature of their relationship. By evaluating housing research, including unemployment variables, this paper gives an overview of the uses of the unemployment variable and show the lack of a specific focus on unemployment in house price research. Theories of unemployment are presented as being a component of housing demand. A composite model of house prices against supply and demand variables used in other research is constructed. Using regional UK panel data of a fixed effects panel regression at the national level, the resulting coefficient for unemployment is compared with similar findings from other studies, resulting in unemployment being shown to be statistically significantly negatively related to house prices. Then, using OLS, no real relationship was found in regional house price sensitivity to unemployment, and how relatively rich or poor a region is. This result was possibly caused by problems with the regression as previous research had indicated that relatively richer regions do have a greater sensitivity of house prices to unemployment.

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    File URL: http://mpra.ub.uni-muenchen.de/41785/1/MPRA_paper_41785.pdf
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    Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 41785.

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    Date of creation: 2010
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    Handle: RePEc:pra:mprapa:41785
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    1. Wilcox, James, 1992. "The Baby Boom, Pent-up Demand, and Future House Prices," Fisher Center for Real Estate & Urban Economics, Research Reports qt4987j9wx, Fisher Center for Real Estate & Urban Economics, UC Berkeley.
    2. Dimitris Korobilis & Michelle Gilmartin, 2011. "On Regional Unemployment: An Empirical Examination of the Determinants of Geographical Differentials in the UK," Working Paper Series 13_11, The Rimini Centre for Economic Analysis.
    3. Charles Ka Yui Leung, 2004. "Macroeconomics and Housing: A Review of the Literature," Discussion Papers 00004, Chinese University of Hong Kong, Department of Economics.
    4. Gathergood, John, 2011. "Unemployment risk, house price risk and the transition into home ownership in the United Kingdom," Journal of Housing Economics, Elsevier, vol. 20(3), pages 200-209, September.
    5. Hwang, Min & Quigley, John M., 2006. "Economic Fundamentals in Local Housing Markets: Evidence from U.S. Metropolitan Regions," Berkeley Program on Housing and Urban Policy, Working Paper Series qt79d325cm, Berkeley Program on Housing and Urban Policy.
    6. John V. Duca & John Muellbauer & Anthony Murphy, 2010. "Housing Markets and the Financial Crisis of 2007-2009: Lessons for the Future," SERC Discussion Papers 0049, Spatial Economics Research Centre, LSE.
    7. Kenny, Geoff, 1999. "Modelling the demand and supply sides of the housing market: evidence from Ireland1," Economic Modelling, Elsevier, vol. 16(3), pages 389-409, August.
    8. Quigley, John M., 2002. "Transactions Costs and Housing Markets," Berkeley Program on Housing and Urban Policy, Working Paper Series qt6pz8p6zt, Berkeley Program on Housing and Urban Policy.
    9. Jian Zhou, 2010. "Testing for Cointegration between House Prices and Economic Fundamentals," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 38(4), pages 599-632, Winter.
    10. Birgitta Rabe & Mark Taylor, 2010. "Residential mobility, quality of neighbourhood and life course events," Journal of the Royal Statistical Society Series A, Royal Statistical Society, vol. 173(3), pages 531-555.
    11. Meen, Geoffrey, 2002. "The Time-Series Behavior of House Prices: A Transatlantic Divide?," Journal of Housing Economics, Elsevier, vol. 11(1), pages 1-23, March.
    12. F J Breedon & M A S Joyce, 1993. "House prices, arrears and possessions: A three equation model for the UK," Bank of England working papers 14, Bank of England.
    13. Shiller, Robert J, 1990. "Market Volatility and Investor Behavior," American Economic Review, American Economic Association, vol. 80(2), pages 58-62, May.
    14. Dimitris Korobilis & Michelle Gilmartin, 2011. "The Dynamic Effects of U.S. Monetary Policy on State Unemployment," Working Paper Series 12_11, The Rimini Centre for Economic Analysis.
    15. Gavin Cameron & John Muellbauer, 2001. "Earnings, unemployment, and housing in Britain," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 203-220.
    16. Benito, Andrew, 2006. "The down-payment constraint and UK housing market: Does the theory fit the facts?," Journal of Housing Economics, Elsevier, vol. 15(1), pages 1-20, March.
    17. Robert Edelstein & Desmond Tsang, 2007. "Dynamic Residential Housing Cycles Analysis," The Journal of Real Estate Finance and Economics, Springer, vol. 35(3), pages 295-313, October.
    18. Riddel, Mary, 2004. "Housing-market disequilibrium: an examination of housing-market price and stock dynamics 1967-1998," Journal of Housing Economics, Elsevier, vol. 13(2), pages 120-135, June.
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