Market depth in the UK housing market

Abstract

This study uses regional data from the UK housing market to analyse market depth. Market depth is the trading volume required to move market prices by one unit. Two methods are applied in this study to analyse the depth of the housing market. First, the responsiveness of housing prices to changes in volume is measured. Second, the relationships between the housing price deviations from the fundamental level and the trading volume are estimated. The results of this article show that a thinner housing market indicates more housing price deviations caused by temporary changes in volume.