House Price Inflation: Consequences and solutions for housing affordability and wealth inequality

Oluwaseun Fajana

ERES from European Real Estate Society (ERES)

Abstract: The fundamental determinants of housing affordability states have been well studied over the years, with insights from both microeconomic and macroeconomic contexts. Microeconomic studies on the subject have focused on the dynamic analyses of households housing ladder transitions or housing consumption choice with numerous research confirming findings with regional and transnational comparisons. There are also a few other studies who have addressed the issue solely from an aggregate perspective focusing on number of transactions, states of housing disequilibrium and role of economic variables. Nonetheless both macro and micro analysis on the states of housing affordability confirm that British young household’s are further delaying home ownership; as there appears to be structural adjustments especially with changes in income distribution. Yet Andrew and Meen(2003b) have informed that the role of changing income distribution may not be the whole story as the role of changing demographics, credit markets and consumer attitudes have not been well explored; particularly with the extent to which extremely optimistic expectations about future house prices contributed to the run up of the recent housing boom remains an open question. This research aims to investigate amongst demographic and other socioeconomic factors; the effect of house price dynamics including price volatilities, expectations of capital growth, and wealth constraints, on the speed of initial transition into home ownership for British young households over time. To achieve this, the study applies a hazard cox model to a longitudinal micro data set exploring the dynamic behavior of British young household’s from the years 1991 to 2016. Britain provides an interesting case study as it experiences substantial house price volatility with huge spatial and inter-temporal variation; also as this geographical area has undergone several structural adjustments and is undergoing a major restructuring with the privatization of council housing. Thus the way various contending influences interact and shape entry into home ownership makes an important policy problem.

Keywords: First time Buyers; House Price Volatility; Structural Change; survival analysis; Wealth (search for similar items in EconPapers)
JEL-codes: R3 (search for similar items in EconPapers)
Date: 2018-01-01
New Economics Papers: this item is included in nep-eur and nep-ure
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Persistent link: https://EconPapers.repec.org/RePEc:arz:wpaper:eres2018_202

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