Unpacking Housing Market Connectedness

Yu-Lieh Huang, Dean Katselas and Pin-Te Lin

ERES from European Real Estate Society (ERES)

Abstract: This paper proposes and tests a different approach to investigating regional connectedness in the UK housing market. Drawing upon the notion that returns may be decomposed into components to reward homeowners for assuming common (market wide) risk, and a residual, which is compensation for idiosyncratic risk, we argue that the latter is particularly relevant when trying to understand regional connectedness. Using the dynamic network methodology with the raw return data, we firstly show that the South East has the greatest influence on regional market integrations, consistent with prior empirical research. Next, we filter the series for a common risk factor, resulting in regional return series which are unrelated to the national housing market. Doing so reveals London to be the most influential region in the country, consistent with intuition and prior theory.

Keywords: Common Risk; Housing Market Connectedness; Idiosyncratic risk (search for similar items in EconPapers)
JEL-codes: R3 (search for similar items in EconPapers)
Date: 2024-01-01
New Economics Papers: this item is included in nep-ure
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Persistent link: https://EconPapers.repec.org/RePEc:arz:wpaper:eres2024-250

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