Holmes, M. J., & Grimes, A. (2008). Is there long-run convergence among regional house prices in the UK? Urban Studies, 45(8), 1531-1544.
Permanent Research Commons link: http://hdl.handle.net/10289/8267
This paper investigates the long-run convergence of regional house prices in the UK. Existing studies have failed to reach a consensus on whether or not regional house prices exhibit long-run convergence with each other. The application is proposed of a new test involving unit root testing of the first principal component based on regional—national house price differentials. Using mix-adjusted quarterly data for 1973—2006, it is found that the first principal component is stationary. This suggests that all UK regional house prices are driven by a single common stochastic trend. Further analysis suggests that those regions that are more distant from London exhibit the highest degrees of persistence with respect to deviations in house price differentials.
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