On the long-run solution to aggregate housing systems

Geoffrey Meen, Alexander Mihailov () and Yehui Wang
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Geoffrey Meen: University of Reading, UK
Yehui Wang: Shandong University of Finance and Economics, China

Urban Studies, 2022, vol. 59, issue 1, 178-196

Abstract: This paper explores the properties of dynamic aggregate housing models. In conventional models, in response to demand shocks the primary adjustment mechanism is through prices and changes in housing supply. However, the size of the supply response depends on the price elasticity of supply and in countries such as the UK where the elasticity is low, house prices can rise sharply, worsening affordability. But this ignores the roles of housing risk and credit markets which affect the user cost of capital and the paper demonstrates that models that explicitly introduce a housing risk premium have an additional price stabiliser. The importance is shown through stochastic simulations; these simulations also demonstrate that conventional models used for forecasting and policy analysis may overstate future house price growth.

Keywords: economic processes; finance; housing; affordability; housing risk; ç» æµŽè¿‡ç¨‹; 金èž; ä½ æˆ¿; å ¯è´Ÿæ‹…æ€§; ä½ æˆ¿é£Žé™© (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:sae:urbstu:v:59:y:2022:i:1:p:178-196

DOI: 10.1177/0042098020976019

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