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An Empirical Analysis of UK House Price Risk Variation by Property Type

Author

Listed:
  • Bruce Morley

    (Department of Economics, University of Bath, Bath, BA2 7AY, U.K.)

  • Dennis Thomas

    (School of Management and Business, Aberystwyth University, Aberystwyth, SY23 3AL, U.K.)

Abstract

This paper examines the different risk and return profiles of four different property types in England and Wales, both nationally and by region. The property types include flats, terraced houses, semi-detached and detached houses. Motivated by the ICAPM approach of Scruggs (1998) and using an EGARCH in mean model, we find evidence of a positive risk-return relationship, with particular regard to terraced and semi-detached housing, as well as asymmetric adjustment, suggesting that mid-range housing is the property type most like other risk-based assets, which could be due to these property types being the most popular with buy-to-let investors. We also find that this relationship differs across property types, as has previously been found across regions.

Suggested Citation

  • Bruce Morley & Dennis Thomas, 2016. "An Empirical Analysis of UK House Price Risk Variation by Property Type," Review of Economics & Finance, Better Advances Press, Canada, vol. 6, pages 45-56, May.
    • Handle: RePEc:bap:journl:160204
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    References listed on IDEAS

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    16. William Miles, 2011. "Long-Range Dependence in U.S. Home Price Volatility," The Journal of Real Estate Finance and Economics, Springer, vol. 42(3), pages 329-347, April.
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    Cited by:

    1. Bruce Morley & Dennis Thomas, 2018. "Covariance Risk and the Ripple Effect in the UK Regional Housing Market," Review of Economics & Finance, Better Advances Press, Canada, vol. 13, pages 1-13, August.
    2. Chris Hudson & John Hudson & Bruce Morley, 2018. "Differing house price linkages across UK regions: A multi-dimensional recursive ripple model," Urban Studies, Urban Studies Journal Limited, vol. 55(8), pages 1636-1654, June.
    3. Paraskevi Katsiampa & Kyriaki Begiazi, 2019. "An empirical analysis of the Scottish housing market by property type," Scottish Journal of Political Economy, Scottish Economic Society, vol. 66(4), pages 559-583, September.
    4. Kyriaki Begiazi & Paraskevi Katsiampa, 2019. "Modelling UK House Prices with Structural Breaks and Conditional Variance Analysis," The Journal of Real Estate Finance and Economics, Springer, vol. 58(2), pages 290-309, February.

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    More about this item

    Keywords

    House prices; Risk; Asset pricing; Asymmetric adjustment; EGARCH;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets
    • R15 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Econometric and Input-Output Models; Other Methods

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