Spatial and Temporal Diffusion of Property Prices and Sales across British Regions

International Journal of Housing Markets and Analysis. 2024. Vol. ahead-of-print. No. ahead-of-print. P. 1–...

Салов А. И.

This paper incorporates two empirical approaches to describe behaviour of property prices across British regions. The models are applied to two different datasets. The first empirical approach is to apply the price diffusion model proposed by Holly et al. (2011) to the UK HPI dataset. The second empirical approach is to apply a bivariate Global VAR model without a time trend to house prices and transaction volumes retrieved from the NBS. The main empirical approaches are complemented by an explanatory spatial data analysis performed at the local authority district level via Bivariate Local Moran cluster maps plotted for each year. The primary purpose of this study is to reveal dynamics of house prices and sales in spatial and temporal dimensions across British regions. Identifying shocks to London house prices in the GVAR model, based on the Generalized impulse response functions (GIRF) framework, I find some heterogeneity in responses of house price changes; for example, South East England responds stronger than the remaining provincial regions. The main pattern detected in responses and characteristic for each region is the fairly rapid fading of the shock. The spatial-temporal diffusion model demonstrates the presence of a ripple effect: a shock emanating from London is dispersed contemporaneously and spatially to other regions, affecting prices in non-dominant regions with a delay.  The main contribution of this work is the conjunction of two empirical approaches and their application to UK data. The combination of two empirical methods deepens our understanding of house price diffusion in spatial and temporal dimensions.

Keywords: housing prices, spatial dependence, ripple effect, panel data, housing markets, Global VAR