Is There Long-run Convergence among Regional House Prices in the UK?

Mark J. Holmes · Arthur Grimes

214 citations0/0 files storedUrban Studies

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Housing Market and Economics Monetary Policy and Economic Impact Regional Economics and Spatial Analysis

Abstract

This paper investigates the long-run convergence of regional house prices in the UK. Existing studies have failed to reach a consensus on whether or not regional house prices exhibit long-run convergence with each other. The application is proposed of a new test involving unit root testing of the first principal component based on regional—national house price differentials. Using mix-adjusted quarterly data for 1973—2006, it is found that the first principal component is stationary. This suggests that all UK regional house prices are driven by a single common stochastic trend. Further analysis suggests that those regions that are more distant from London exhibit the highest degrees of persistence with respect to deviations in house price differentials.

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References

1987Co-Integration and Error Correction: Representation, Estimation, and Testing 1988Statistical analysis of cointegration vectors 2003Testing for unit roots in heterogeneous panels 2002Unit root tests in panel data: asymptotic and finite-sample properties 1996Efficient Tests for an Autoregressive Unit Root 1992Efficient Tests for an Autoregressive Unit Root 2001LAG Length Selection and the Construction of Unit Root Tests with Good Size and Power 2000Testing for stationarity in heterogeneous panel data

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2011Investigating regional house price convergence in the United States: Evidence from a pair-wise approach 2005Detecting long‐run relationships in regional house prices in the UK 2010Regional Housing Price Cycles: A Spatio-temporal Analysis Using US State-level Data 2011Unit Roots and Structural Change 2010The Time-Series Properties of House Prices: A Case Study of the Southern California Market 2018

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