Financial and macroeconomic drivers within housing market cycles: an international perspective

Abstract

The global financial crisis of 2007/2008 has given rise to an unprecedented worldwide liquidity shortage, and as a consequence interaction between financial, housing and macroeconomic factors has been given ever increasing attention. This thesis focuses on the influence and effects of financial and macroeconomic market drivers upon the function of housing market cycles. The research assesses the operation of residential property markets within the overall concept of market theory and appraises the impact of various macroeconomic and financial variables upon the performance of these residential markets.

Initially, this is achieved through the selection, evaluation and analysis of quantitative secondary data sources in order to generate UK base models. The modelling process uses house price as the dependent variable, with selected financial, housing and macroeconomic drivers evaluated to assess their contribution towards performance. The UK based models are then compared to comparative models centered upon markets of the US, Australia and Germany.

The research shows that a number of house price drivers are consistent between nations. Specifically, the predictive qualities of the margin between the interest base rate of a country and the London Interbank Offered Rate (LIBOR), housing finance, unemployment and the price of gold are shown to exert a significant explanation of house price movements. The research also shows that the extent and nature of the impact upon house price varies, not just over different periods within the timescale of the study, but also between the different countries. In addition, the influential variables themselves appear to change with the underlying macroeconomic and financial situations. UK housing market cycles are shown to be influenced by several common financial and macroeconomic drivers; however it would appear that the UK market is
largely independent in relation to housing market cycles.

Thesis is embargoed until 30th June 2014

Date of Award	Apr 2012
Original language	English
Supervisor	Stanley Mc Greal (Supervisor), Jim Berry (Supervisor) & TERRY GRISSOM (Supervisor)