Abstract
The paper makes use of the concept of chains of movement to develop a recursive model of the housing market in which prices and the value of transactions at each 'level' are determined sequentially. The model is then used to examine the effects of changes in the allocation of Building Society lending on the value of transactions in the housing market, and on the value of new house sales. Finally, it is argued that both new and existing house prices display considerable short-run rigidity, and hence, in the short run, changes in the allocation of lending will be reflected primarily in changes in the physical volume of movements, and in the real level of activity in the housebuilding industry.
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