Seasonality and Cointegration of Regional House Prices in the UK

Abstract

The data generation process underlying regional house prices in the UK is investigated using new statistical tests. It is found that causal flows tend to be northwards: the South East (rather than Greater London) acts as an exogenous price determinator of the other regions in the south; the Midland regions have a great influence on prices in the north and flows through the East Midlands are characterised by bi-directional causality. These results are largely independent of assumptions made about the data generation process (and tests of these assumptions have low power in any case). There are also similarities between this causality and migration patterns, particularly in the south of England.