Housing constitutes a major part of the real wealth of many countries as well as households overall wealth portfolio. As a result, there is the continuous need to measure house price dynamics and understand the housing markets especially at the local levels as opposed to the national and regional levels. This thesis focuses on the Aberdeen housing market in Scotland and considers a number of issues in relation to measuring and understanding the price dynamics of the study area. The thesis empirically highlights why house price indices should be confined to the local markets, produces constant-quality house price indices for the study area, measures the accuracy of five different index construction models, tests if temporal aggregation affects the construction of house price indices, and applies the indices to examine the relationship between new residential construction and various determinants and also estimates house price elasticity of supply for the local housing market. The thesis adopts a quantitative research approach. The dataset for the house price index construction is obtained from the Aberdeen Solicitors' Property Centre and spans from January 2000 to December 2010 with about 57,000 property transactions and includes both the house prices and a number of physical and locational characteristics. The dataset for examining the determinants of new residential construction is also obtained from a number of sources including new housing starts from the Scottish Government Statistics and building warrants granted from the Aberdeen City Council. The thesis finds that the national and regional house price indices do not portray accurate picture of house price trend in the local housing market and so it is important for price trend analysis to be confined to the local level. The study also finds that in the construction of house price indices, the lower level of temporal aggregation, that is, monthly and quarterly is to be preferred and at this level of temporal aggregation, the explicit time variable hedonic and the Quigley's hybrid models perform better by producing the lowest mean squared errors. At the broader level of temporal aggregation however, the strictly cross-sectional hedonic model does better. In general, the repeat-sales method is found to be the least preferred method of constructing house price indices. The thesis also finds that changes in house prices, time on the market, planning regulation, lagged stock, and lagged and future housing starts are the main factors that influence new residential construction in Aberdeen. These factors have the expected signs with the changes in house prices having a large positive coefficient of about 3.7% in the current period. All these factors are measured at the local housing market level. The national variables, material costs and interest rates, however do not have any effect on new housing construction in Aberdeen. This suggests that when modelling the local housing market, local variables are more useful than the national variables. These influential local variables would not be measured properly or would be ignored entirely when the national or regional housing markets are modelled and stresses the need to conduct housing studies at the local level. The price elasticities of supply estimated are in the range of 2.0-3.2 for housing starts, and 0.01-0.02 for housing stock. The starts elasticities are higher than most of the local housing markets elasticities in the UK. Thus, private developers in Aberdeen respond more to a change in house price by initiating new construction than most of the local authority districts in the UK. These findings have a number of practical and policy implications and the methods could be applied to estimate house price indices for the other local housing markets in the UK when the data system in the UK is improved. More studies are needed at the local levels in the UK so that some of the issues raised in the thesis can be explored further.
| Identifer | oai:union.ndltd.org:bl.uk/oai:ethos.bl.uk:619165 |
| Date | January 2012 |
| Creators | Owusu-Ansah, Anthony |
| Publisher | University of Aberdeen |
| Source Sets | Ethos UK |
| Detected Language | English |
| Type | Electronic Thesis or Dissertation |
| Source | http://digitool.abdn.ac.uk:80/webclient/DeliveryManager?pid=211326 |
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