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Climbing the property ladder: An analysis of market integration in London property prices

Listed author(s):
  • Mark J. Holmes

    ()

    (Department of Economics, Waikato University, New Zealand)

  • Jesús Otero

    ()

    (Facultad de Economía, Universidad del Rosario, Colombia)

  • Theodore Panagiotidis

    ()

    (Department of Economics, University of Macedonia, Greece; The Rimini Centre for Economic Analysis, Italy)

We investigate the long-run convergence of house prices across the London boroughs based on a pairwise unit root probabilistic testing procedure. In sharp contrast to the earlier literature, we employ a dataset that distinguishes between four different types of property in each borough. Using a quarterly dataset that spans from 1995 to 2014, we find evidence in favour of long-run convergence thereby suggesting that the great majority of London borough house prices are driven by a single common stochastic trend. In a further contribution, we offer new insights through analysing the determinants of long-run convergence, by considering the role of geographic proximity, type of accommodation, and amenities (quality of life).

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File URL: http://www.rcea.org/RePEc/pdf/wp16-30.pdf
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Paper provided by The Rimini Centre for Economic Analysis in its series Working Paper Series with number 16-30.

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Date of creation: Dec 2016
Handle: RePEc:rim:rimwps:16-30
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  1. Hashem Pesaran, M., 2007. "A pair-wise approach to testing for output and growth convergence," Journal of Econometrics, Elsevier, vol. 138(1), pages 312-355, May.
  2. Andrew Abbott & Glauco De Vita, 2012. "Pairwise Convergence of District-level House Prices in London," Urban Studies, Urban Studies Journal Limited, vol. 49(4), pages 721-740, March.
  3. Jesús Otero & Jeremy Smith, 2012. "Response surface models for the Leybourne unit root tests and lag order dependence," Computational Statistics, Springer, vol. 27(3), pages 473-486, September.
  4. Fack, Gabrielle & Grenet, Julien, 2010. "When do better schools raise housing prices? Evidence from Paris public and private schools," Journal of Public Economics, Elsevier, vol. 94(1-2), pages 59-77, February.
  5. Mark J. Holmes & Arthur Grimes, 2008. "Is There Long-run Convergence among Regional House Prices in the UK?," Urban Studies, Urban Studies Journal Limited, vol. 45(8), pages 1531-1544, July.
  6. Stephan Huber & Christoph Rust, 2016. "Calculate travel time and distance with OpenStreetMap data using the Open Source Routing Machine (OSRM)," Stata Journal, StataCorp LP, vol. 16(2), pages 416-423, June.
  7. Otero, Jesus & Smith, Jeremy, 2000. "Testing for cointegration: power versus frequency of observation -- further Monte Carlo results," Economics Letters, Elsevier, vol. 67(1), pages 5-9, April.
  8. Leybourne, S J, 1995. "Testing for Unit Roots Using Forward and Reverse Dickey-Fuller Regressions," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 57(4), pages 559-571, November.
  9. Edward L. Glaeser & Joshua D. Gottlieb, 2009. "The Wealth of Cities: Agglomeration Economies and Spatial Equilibrium in the United States," Journal of Economic Literature, American Economic Association, vol. 47(4), pages 983-1028, December.
  10. Steve Gibbons, 2004. "The Costs of Urban Property Crime," Economic Journal, Royal Economic Society, vol. 114(499), pages 441-463, November.
  11. Cheung, Yin-Wong & Lai, Kon S, 1995. "Lag Order and Critical Values of the Augmented Dickey-Fuller Test," Journal of Business & Economic Statistics, American Statistical Association, vol. 13(3), pages 277-280, July.
  12. Myriam Nourry, 2009. "Re-Examining the Empirical Evidence for Stochastic Convergence of Two Air Pollutants with a Pair-Wise Approach," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 44(4), pages 555-570, December.
  13. Mark J. Holmes & Jesús Otero & Theodore Panagiotidis, 2017. "A Pair-wise Analysis of Intra-city Price Convergence Within the Paris Housing Market," The Journal of Real Estate Finance and Economics, Springer, vol. 54(1), pages 1-16, January.
  14. Carlino, Gerald A. & Mills, Leonard, 1996. "Testing neoclassical convergence in regional incomes and earnings," Regional Science and Urban Economics, Elsevier, vol. 26(6), pages 565-590, December.
  15. Holmes, Mark J. & Otero, Jesús & Panagiotidis, Theodore, 2011. "Investigating regional house price convergence in the United States: Evidence from a pair-wise approach," Economic Modelling, Elsevier, vol. 28(6), pages 2369-2376.
  16. Leung, Charles, 2004. "Macroeconomics and housing: a review of the literature," Journal of Housing Economics, Elsevier, vol. 13(4), pages 249-267, December.
  17. Holly, Sean & Hashem Pesaran, M. & Yamagata, Takashi, 2011. "The spatial and temporal diffusion of house prices in the UK," Journal of Urban Economics, Elsevier, vol. 69(1), pages 2-23, January.
  18. Paul Cheshire & Stephen Sheppard, 2004. "Capitalising the Value of Free Schools: The Impact of Supply Characteristics and Uncertainty," Economic Journal, Royal Economic Society, vol. 114(499), pages 397-424, November.
  19. Michael J. Ball, 1973. "Recent Empirical Work on the Determinants of Relative House Prices," Urban Studies, Urban Studies Journal Limited, vol. 10(2), pages 213-233, June.
  20. Baltagi, Badi H. & Bresson, Georges, 2011. "Maximum likelihood estimation and Lagrange multiplier tests for panel seemingly unrelated regressions with spatial lag and spatial errors: An application to hedonic housing prices in Paris," Journal of Urban Economics, Elsevier, vol. 69(1), pages 24-42, January.
  21. Stephen Gibbons & Stephen Machin, 2006. "Paying for Primary Schools: Admission Constraints, School Popularity or Congestion?," Economic Journal, Royal Economic Society, vol. 116(510), pages 77-92, 03.
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