A Disaggregated Analysis of Asymmetrical Behaviour in the UK Housing Market

Abstract

Potential asymmetrical adjustment in UK house prices is considered. The present analysis extends previous research in a number of crucial ways. First, a seminal examination of asymmetry in regionally disaggregated UK house prices is undertaken. Secondly, data are examined which are further disaggregated according to the age, or vintage, of the housing stock. However, the major development concerns the application of a non-parametric testing approach to detect cyclical asymmetry. In contrast to previously employed tests in the economics literature, the Triples test employed possesses high power and is not sensitive to outliers. It is found that extensive asymmetry is present in UK house prices, with cyclical peaks typically being greater in magnitude than corresponding troughs. The implications of these findings for the comparison and construction of economic theories of the housing market, the specification of econometric models and the construction and implementation of economic policy are noted.