Regional spillover of housing (un)affordability: an empirical study on the residential housing markets for first-time buyers in the U.K.

Daniel Lo, Michael McCord, Graham Squires

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1 Citation (Scopus)
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Abstract

This study examines the lead–lag relationships between the levels of housing affordability of different regions of the U.K. By utilizing government data, a number of housing affordability indicators are constructed to explore whether spatial diffusion exists between different regional submarkets of first-time homebuyers over the period of 2000 – 2021. The results reveal that during periods of economic expansion, housing unaffordability tended to diffuse from regions of slower economic growth to regions of higher economic development. It is further evident that in the aftermath of the GFC, the London housing market Granger-caused other regional markets in terms of housing (un)affordability. Lastly, the U.K’.s decision to leave the EU in 2016 seems to have led to more divergence between the submarket regions, which in a Granger causal sense, have become less causally correlated in terms of pricing. We conjecture that the causal interactions between the different regional housing submarkets exist with the lead–lag relationships governed primarily by their underlying macroeconomic fundamentals.
Original languageEnglish
Pages (from-to)4251-4268
Number of pages18
JournalApplied Economics
Volume56
Issue number35
Early online date6 Jun 2023
DOIs
Publication statusPublished online - 6 Jun 2023

Bibliographical note

Publisher Copyright:
© 2023 The Author(s). Published by Informa UK Limited, trading as Taylor & Francis Group.

Keywords

  • Affordability
  • housing market
  • cointegration
  • causality
  • U.K.

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