House price inflation in the news: a critical discourse analysis of newspaper coverage in the UK

Abstract

In the UK, house prices have been rising over a long period, notwithstanding the disruption caused by the financial crisis, creating growing concerns about affordability particularly for younger households, while existing owners continue to enjoy windfall wealth gains. This paper uses critical discourse analysis to examine how these competing interests with respect to house price rises are represented in popular discourse. It systematically analyses newspaper coverage, comparing two time periods, one relatively stable and the second a period of rising house prices. This analysis exposes the powerful influence of industry insiders in creating the discourse of the housing market news, and how price rises are positioned as both beneficial and the ‘natural order’. Analysing the metaphoric representations of housing markets allows a closer interrogation of the ideological construct that associates a ‘healthy’ housing market as one of continuous price rises and shows how these discourses are deeply embedded, in ways that limit the scope for imagining an alternative house market functioning.     

Housing Careers,House Price Dispersion and the Housing Market Multiplier

Housing markets reflect our housing consumption profile over the life cycle. As we age, marry and have kids, we seek larger dwellings and to a greater extent owner-occupied housing. The up-trading process has two key characteristics: first, it is equity induced. Second, it impacts both the supply and demand sides of housing markets. This is our point of departure. The paper combines a housing ladder with a house price index to show how up-trading amplifies shocks and introduces a multiplier into the housing market. The interplay between market segments results in up-trading induced price dispersion and a price response in the segments on top of the ladder that exceeds those of segments further down, even when shocks are equal across market segments. Finally, as up-trading impacts both housing supply and housing demand, even balanced shocks to net demand might impact house prices. Focusing on different market segments, shocks to demand might have both direct (the size effect) and indirect (the up-trading effect) effects on the house price index. This paper highlights policy options at a finer level when in need of stimulating or dampening house price cycles.     

Icelandic boom and bust: immigration and the housing market

The housing market boom in Iceland in 2004–2007 was driven by international and domestic developments. A simple demand and supply model is fitted to data through the recent boom–bust period. The price equation (demand) is improved by including net immigration as an explanatory variable showing that demographic factors, in addition to mortgage market restructuring, help in explaining swings in the housing market. Evidence of a house price bubble is no longer detected when accounting for the effects of immigration with 1 per cent net immigration yielding a 4–6 per cent rise in house prices. Accuracy in forecasting house price developments is improved by accounting for housing investment behaviour in a separate (supply) equation. The sharp fall in housing investment in 2009 cannot, however, be modelled without the introduction of a dummy variable, accounting for the sudden stop in financing as the Icelandic banking sector failed in late 2008.     

House price diffusion of housing submarkets in Greater Sydney

Abstract

Despite numerous studies investigating house price diffusion between regional cities, few have considered a spillover effect among housing submarkets within a metropolitan city. This study expands upon the limited literature to examine house price diffusion of housing submarkets (namely, low-priced and high-priced submarkets) in Greater Sydney, one of the most diverse housing markets in Australia, using convergence tests, cointegration techniques, Granger causality and dynamic ordinary least square cointegration tests. The results show that a long-run relationship in house prices exists between these two submarkets in Greater Sydney. Importantly, the empirical results show that a large degree of diffusion takes place from the less prosperous submarket to the high-end submarket. This supports the equity transfer hypothesis via a filtering process in which house prices in the low-priced submarket will be transmitted into the high-priced submarket. The study also finds that the low-priced submarket is the primary reactor to changes in economic fundamentals. These findings have some profound implications for policy-makers and housing investors.     

Housing Supply and Price Reactions: A Comparison Approach to Spanish and Italian Markets

Italian and Spanish property markets have experienced a sustained period of growth since the mid-1990s until 2008 when both markets fell into rapid decline due to the worldwide Financial Economic Crisis (FEC). Although the economic impact of the FEC was similar, each country experienced different reactions in its respective real estate market, changes on house prices, building constructions or planning regulations. This paper presents a new supply equation for Italian and Spanish regional markets. A pool of EGLS/IV Two-Step GLS methods are used to account for cross-sectional heteroskedasticity with fixed effects in order to control space differences. The analysis has been developed at a regional level, and shows the variation in the responsiveness of the new housing supply to prices by region. The results show long-term price supply elasticity by regions, and the negative impact of exogenous shock. They also suggest that house markets follow similar patterns in several regions with elastics responses in most territories and stronger negative impact of credit crunch in Spanish than Italian housing development.     

Do Urban House Prices Converge?

We investigate two aspects of housing market price dynamics. Firstly, whether the spatial pattern of house prices in a metropolitan housing market converge or diverge over time and secondly, whether suburbs with relatively low (high) house prices 20 years ago continue to occupy the same relative position in the house price distribution. The empirical work uses a property transaction database for Melbourne to examine the changing distribution of suburban house prices over a nearly 20-year period (1990–2009) that spans two housing cycles. We focus on convergence measures that use Melbourne submarket-based repeat sale house price indexes as a unit of measurement. We find that house prices diverge, and so the gap between low-priced submarkets and high-priced submarkets is increasing. A second key result is that low-priced submarkets typically remain at the low end of the house price distribution, because their rates of appreciation fall short of those at the upper end of the house price distribution. The geography of house price dynamics suggests that the price gradient with respect to distance from the central business district is becoming steeper.     

Price discovery of property markets in Shenzhen and Hong Kong

Hong Kong and Shenzhen, while being interrelated in many aspects, have encountered different types of demand shocks throughout the past decade. This is likely due to disparities in market conditions and degrees of government regulations. In the light of such differences in property price trends, this research first investigates the relationships between housing prices and market fundamentals for both cities; and then it explores whether a housing price bubble existed for them in 2006. The results indicate that housing prices seem to have interacted abnormally with market fundamentals in recent years, especially for Shenzhen. In addition, while Shenzhen’s housing prices are mainly explained by previous housing prices and personal income, most economic indicators explain Hong Kong’s housing prices well. With regard to price bubbles, a puny bubble which amounts to as much as 4.5% of the housing price was formed in Shenzhen in 2006. In the meantime, the housing price bubble for Hong Kong had been diminished. Though currently not at dangerous levels, housing price bubbles should be taken with caution especially in today’s China, characterized by overinvestment and rapid policy changes.     

Price bubbles and policy interventions in the Chinese housing market

The recent dramatic increases in house prices have led to considerable attention being focused on housing markets in China. Using a unique dataset of city-level house prices and rents, this paper investigates the presence of price bubbles in major Chinese city housing markets. Our findings show evidence of price bubbles in most housing markets, even though the bubbles might be, to a large extent, mitigated by strong government intervention. In order to distinguish rational bubbles from irrational bubbles, we extend the existing work to allow a deterministic time trend and break points in the unit root test of house price–rent ratios. As a consequence, our results demonstrate that the price–rent ratios in most of the sample cities are no longer non-stationary, implying the non-existence of rational bubbles in the housing markets.     

Expectation Adjustment in the Housing Market: Insights from the Scottish Auction System

This paper examines price expectation adjustment of house buyers and sellers to rapid changes in the housing market using data from Scotland where houses are sold through ‘first-price sealed-bid’ auctions. These auctions provide more information on market signals, incentives and the behaviour of market participants than private treaty sales. This paper therefore provides a theoretical framework for analysing revealed preference data generated from these auctions. We specifically focus on the analysis of the selling to asking price difference, the ‘bid-premium’. The bid-premium is shown to be affected by expectations of future price movements, market duration and high bidding frequency. The bid-premium reflects consumer's expectations, adapting to market conditions more promptly than asking price setting behaviour and final sale prices. The volatile conditions of the recent housing market bubble are fully reflected in the bid-premium, whereas the asking and sale prices are much less prone to rapid movements.     

Housing prices and policy dilemmas: a peculiarly Australian problem?

House price inflation has a long tradition in Australia. By international standards the current housing boom is 'world class'; Australia, along with Britain, heads the OECD league table for house price increases. This article first describes the boom in Australian house prices, distinguishing the differences across geographic and dwelling type sub-markets. The drivers behind these changes are then discussed, ranging from short-term factors like interest rate levels and investor behaviour to longer-term factors like economic growth and demographic change. Institutional influences, notably tax regimes and land-use planning regulations, are also addressed. The article then considers the tendentious but timely question—'is Australia experiencing a speculative housing investment bubble and, if so, will it burst?' The article goes on to consider what the consequences or costs might be, in terms of the broader issues of macroeconomic policy.     

The Global House Price Boom and its Unwinding: An Analysis and a Commentary

The unprecedented rises in house prices across much of the industrialized world during the period 1997–2006 have been closely linked to the massive global credit expansion of the past decade. They have also coincided with the highest rates of growth of the global economy on record. The downturn of house prices in the US that began in late 2006 has been the trigger for the US sub-prime crisis, itself the catalyst for the broad financial crisis that began in August 2007 which by September 2008 had become the worst US financial crisis since 1929. As a result, the structure of the highly influential US mortgage finance system has already changed fundamentally. These US problems will lead to a thorough review of mortgage securitization processes and of the wholesale funding of mortgage finance across the world. However, housing markets and housing finance systems differ significantly between countries and will channel the shocks originating from the US with varying intensity. Given the interdependence of the global economy, the quality of the US policy response and its impact on the depth and duration of the US recession will influence house price downturns in all other countries. This paper, written in the midst of the US crisis, looks to our understanding of fundamental economic and financial relationships: first, to describe the key features of the house price boom; second, to examine the likely impacts of the unwinding of that boom; and, finally, to bring out implications for affordability, the provision of housing credit and the most appropriate forms of tenure for higher risk households.     

A Nested Housing Market Structure: Additional Evidence

This paper analyses the housing market and its structure in Málaga, a medium-size European city, which has become one of the main Spanish tourist destinations and thus one of the most active housing markets in Spain. This has led to coastal land being misused to the extent that it has almost been used up. First, the market as a whole is studied using the hedonic methodology. Then a method is presented which segments the market into sub-markets, following an ad hoc design based on two criteria: structural (vertical and horizontal dwellings) and location (proximity to the coast). The results show that this segmentation method is efficient, demonstrating implicit attribute prices as well as final house prices which are statistically different from each other, above all when dwellings are next to the coast and between those further away. Finally, some implications for urban policy are drawn.     

Price-quantity interactions in the market for new housing in Northern Ireland

The aim of this paper is to construct a model of the market for new housing in Northern Ireland capable of forecasting the prospects of the housebuilding industry, and of simulating the effect of policy initiatives. Much of applied work on housing markets has concentrated on the equilibrating role of prices. In the market for new housing this effect is complicated by the physical lags involved in the supply side response. The paper develops a simple theoretical framework in which price adjusts to equilibrate demand and current supply. A reduced form price change equation is used to model any imbalance of current demand and housing completions. The model is estimated using data for Northern Ireland, and the implications of the results for the management of regional housing markets are discussed.     

Exploring,modelling and predicting spatiotemporal variations in house prices

Hedonic price modelling has long been a powerful tool to estimate house prices in the real estate market. Increasingly, traditional global hedonic price models that largely ignore spatial effects are being superseded by models that deal with spatial dependency and spatial heterogeneity. In addition, many novel methods integrating spatial economics, statistics and geographical information science (GIScience) have been developed recently to incorporate temporal effects into hedonic house price modelling. Here, a local spatial modelling technique, geographically weighted regression (GWR), which accounts for spatial heterogeneity in housing utility functions is applied to a 19-year set of house price data in London (1980–1998) in order to explore spatiotemporal variations in the determinants of house prices. Further, based on the local parameter estimates derived from GWR, a new method integrating GWR and time series (TS) forecasting techniques, GWR–TS, is proposed to predict future local parameters and thus future house prices. The results obtained from GWR demonstrate variations in local parameter estimates over both space and time. The forecasted future values of local estimates as well as house prices indicate that the proposed GWR–TS method is a useful addition to hedonic price modelling.

     

The global financial crisis and the Australian and New Zealand housing markets

The evolution of the US sub-prime mortgage meltdown into a global financial crisis clearly demonstrates the increasingly integrated nature of mortgage and capital markets. However, notwithstanding the global scale and severity of the recent financial crisis, the effects of the credit crunch were mediated by nationally constituted housing markets, the activities of local financial institutions and national housing policies. Adopting an institutional perspective this paper critically examines the manner in which the financial crisis impacted upon the Australian and New Zealand housing markets. These countries had actively participated in the liberalisation of mortgage markets and experienced significant house price inflation post-2000 but, in contrast to the USA and some European experiences, they escaped a severe housing downturn. It is argued that a combination of pre-existing institutional practices, market conditions and government policies acted to shelter these markets and created the potential conditions for a new housing boom. While avoiding a deep housing slump, both Australia and New Zealand have to address the on-going macroeconomic implications of a system predicated on housing inflation and capital gains.     

The impact of renewable energy on household electricity prices in liberalized electricity markets: A cross-national panel data analysis

The main research questions addressed in this paper are: first, have electricity market reforms achieved lower household electricity prices and, second, has the introduction of renewable energy increased household electricity prices in deregulated markets Answers to the questions were derived using static and dynamic panel data analysis from 1991 to 2014 employing explanatory variables such as the extent of electricity market reform and the share of generation from renewable energy resources. The dynamic model suggests that a lower household electricity price is associated with the degree of electricity market reform, while the share of renewable energy in electricity generation is not statistically significant.     

Real estate prices in Kenya: is there a bubble?

This study focuses on the determinants of the prices of houses in Nairobi, Kenya. The study finds housing prices to have positive relationships with GDP, diaspora remittances, lending rates, loans to real estate sector and cost of construction. A negative relationship exists between the house prices and inflation. Results of the cointegration tests indicate the existence of stable long-run relationships between house prices and each of GDP and NSE Index, while unstable relationships are reported for diaspora remittances and building costs. Using fractional integration, the results show higher orders of integration for the house price series compared with the other variables, though the study is indifferent about the existence of a house price bubble. Granger causality tests indicate there are no causal relationships between house prices and diaspora remittances. However, there are two way causalities between house prices and each of GDP, building costs and NSE Index. This negates the existence of a house price bubble.     

基于系统动力学的沈阳市房价影响因素分析

运用系统动力学方法构建城市住宅市场仿真模型,探究影响房价变化的主要因素。结合沈阳市住宅市场的发展实际, 通过 Anylogic 软件构造系统因果关系反馈图以及流程图,再利用回路建立数学关系模型,选取房产税、贷款利率、限购政 策 3 个变量,讨论不同政策对房价产生的影响。研究发现,开征房产税,使得市场需求量明显降低;限购政策在一定时期内 可以维持房价的稳定;提高银行贷款利率,房价没有出现较大波动;在限购政策和利率综合作用下,对房价产生的影响较大。     

Effects of policy changes on property prices— A simulation model

This paper presents a simulation model designed to predict the impact of policy changes on prices and quantities of owner‐occupied housing in the short and long run. Because liquidity considerations are important, house prices are assumed to depend on cash flow. The model predicts that elimination of interest subsidies in Sweden would cause a 10% short‐run decrease in price for new houses, but that prices would not change for old houses. In the long run, the volume of owner‐occupied housing would decline substantially and prices of old houses would increase by 15–20 %. Introduction of a property tax or a decrease in inflation are predicted to decrease house prices in the short run and to increase them in the long run as the volume of owner‐occupied housing shrinks.     

Identification of house price bubbles using robust methodology: evidence from Polish provincial capitals

This article aims to check whether there has been a price bubble in the Polish major housing markets in recent years. To accomplish this goal, the log price-to-rent ratios in Polish provincial cities were analysed. In order to avoid incorrect conclusions, the log price-to-rent ratio using the instrumental variable estimation and ordinary least squares methods was decomposed into two components: fundamental and non-fundamental. The latter was then examined using the Phillips, Shi, and Yu procedure to detect explosive and downward movements. The results of the study showed that, in general, over 2011, actual log price-to-rent ratios in the analysed cities were below their fundamental values, i.e., a negative price bubble existed. However, more or less since the beginning of 2013, the surveyed markets have seen an increasing level of the non-fundamental component of the index under study, and its particularly explosive movements are visible in the first quarters of 2014. Finally, this analysis indicated future research directions and study implications for Polish policy-makers, housing investors, and households.