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The Journal of Real Estate Finance and Economics

, Volume 48, Issue 1, pp 132–163 | Cite as

Persistence and Predictability in UK House Price Movements

  • Felix Schindler
Article

Abstract

This paper extends the analysis of predictability and persistence of inflation-adjusted house price movements in the UK housing market both on a regional level across 13 regions and on a nationwide level. Applying a univariate time series approach, the results from the quarterly transaction-based Nationwide Building Society indices from 1974 to 2009 provide empirical evidence for a high persistence of house price movements. In addition to conducting parametric and non-parametric tests, we provide technical trading strategies as a robustness check to compare predictability across markets and to test whether or not the detected persistence can also be used for detecting turning points in the market. The empirical findings from the technical trading strategies support the results from the statistical tests. Moving average-based trading strategies perform extremely well in the southern regions, while trading strategies are less profitable for the northern regions and Wales. Thus, from an investors’ perspective, there are excess real returns from moving average-based strategies compared to a buy-and-hold strategy for most regional markets. From a household perspective, the findings support the importance of derivative markets where households could hedge their risk exposure from being homeowner.

Keywords

Housing market Times series model Predictability Persistence 
JEL Classifications C22 C53 G14 R30 

Notes

Acknowledgments

We thank the editor C. F. Sirmans and two anonymous referees for very constructive and helpful comments. All errors are ours.

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Copyright information

© Springer Science+Business Media, LLC 2012

Authors and Affiliations

  1. 1.Department of International Finance and Financial ManagementCentre for European Economic Research (ZEW) – MannheimMannheimGermany
  2. 2.Center for Real Estate Studies (CRES)Steinbeis University Berlin (SHB)BerlinGermany

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