Ten New Propositions in UK Housing

Ten New Propositions in UK Housing Macroeconomics: Macroeconomics: An Overview of the First Years of the Century
Geoffrey Meen
Meen (1996) set out a series of ten propositions concerning housing macroeconomics in the UK. These propositions concerned some of the central policy issues of the eighties and early nineties, for example, the effects of mortgage market liberalisation, explanations of house price dynamics and the role of the housing market in Britain’s exit from the Exchange Rate Mechanism. In this paper, ten further propositions are considered, which reflect the new policy agenda and advances in economic knowledge since the earlier paper. Arguably, three of the current central issues in housing economics in the UK are; (i) the growth in real house prices and their volatility – a continuing theme; (ii) the objective of extending home ownership; (iii) the promotion of integrated or mixed income neighbourhoods. The third is considered in Meen et al (2005), whereas the first two are the subject of this paper, which include issues of risk (both for housing markets and the macro economy) and the sustainability of home ownership.


2.1 The Growth in House Prices, Volatility and Risk
(1) The strength of house prices since 1996 is explainable in terms of fundamentals
(2) There is no simple relationship between house prices and rents
(3) There is asymmetric adjustment between upswings and downswings
(4) The coefficients of house price models are stable over time
(5) In general, increases in house prices do not counterbalance falls in stock market prices


2.2 The Sustainability of Home-Ownership

(6) Natural rates of housing repossessions are higher than in the seventies and early eighties
(7) Sustainable levels of home-ownership depend primarily on the expansion of housing
supply rather than on demand.
(8) The Buy-to-Let market will not continue to expand at the same rate as in the last ten years.,
(9) Wealth redistribution by extending ownership can be risky.
(10) New households are not the main beneficiaries of affordability targets.