What are the most important factors that influence the changes in London Real Estate Prices? How to quantify them?

Yiyang GU

Abstract


Abstract. In recent years, real estate industry has captured government and public attention around the world. The factors influencing the prices of real estate are diversified and complex. However, due to the limitations and one-sidedness of their respective views, they did not provide enough theoretical basis for the fluctuation of house price and its influential factors. The purpose of this paper is to build a housing price model to make the scientific and objective analysis of London's real estate market trends from the year 1996 to 2016 and proposes some countermeasures to reasonably control house prices.  Specifically, the paper analyzes eight factors which affect the house prices from two aspects: housing supply and demand and find out the factor which is of vital importance to the increase of housing price per square meter. The problem of a high level of multicollinearity between them is solved by using principal components analysis.

Keywords. Real estate market, Real estate price.

JEL. L85, R30, R33.


Keywords


Real estate market; Real estate price.

Full Text:


References


Andersson, T. (1958).Multivariate Statistical Ananalysis. John Wiley and Sons, Inc., New York.

Bin, O. (2004). A prediction comparison of housing sales prices by parametric versus semi-parametric regressions. Journal of Housing Economics, 13(1), 68-84. doi. 10.1016/j.jhe.2004.01.001

Brown, J.P., Song, H.,& McGillivray, A. (1997). Forecasting UK house prices: A time varying coefficient approach. Economic Modelling, 14(4), 529-548. doi. 10.1016/S0264-9993(97)00006-0

Case, K.E.,& Shiller, R.J. (2003). Is there a bubble in the housing market?. Brookings Papers on Economic Activity, 2003(2), 299-342.

Case, K.E., Quigley, J.M.,& Shiller, R.J. (2003). Home-buyers, Housing and the Macroeconomy. Berkeley Program on Housing and Urban Policy.

Clapp, J.M.,& Giaccotto, C. (1994). The influence of economic variables on local house price dynamics. Journal of Urban Economics, 36(2), 161-183. doi. 10.1006/juec.1994.1031

DeCoster, J. (1998). Overview of factor analysis. [Retrieved from].

Dunteman, G.H. (1989). Principal Components Analysis, No.69. Sage.

Gov.uk. (2017). Live tables on house building: new build dwellings - GOV.UK. Accessed 9 Jan. 2018.[Retrieved from].

Gress, B. (2004).Using Semi-Parametric Spatial Autocorrelation Models to Improve Hedonic Housing Price Prediction. Mimeo, Department of Economics, Riverside.

Harris, C.W.,& Kaiser, H.F. (1964). Oblique factor analytic solutions by orthogonal transformations. Psychometrika, 29(4), 347-362. doi. 10.1007/BF02289601

Hedeker, D. (2008). Multilevel models for ordinal and nominal variables. In Handbook of multilevel analysis (pp. 237-274). Springer, New York, NY.

Kabacoff, R.I. (2010). R in Action. Manning.

Kayacan, E., Ulutas, B.,& Kaynak, O., 2010. Grey system theory-based models in time series prediction. Expert Systems with Applications, 37(2), 1784-1789. doi. 10.1016/j.eswa.2009.07.064

London Datastore, (2018). London Datastore: GLA key performance indicators. Available at: Accessed: 9 Jan. 2018. [Retrieved from].

London Datastore, (2016). London Datastore: land area and population density ward and borough. Available at: Accessed: 9 Jan. 2018. [Retrieved from].

London Datastore, (2016). London Datastore: UK house price index. Available at: Accessed: 2 Jan. 2018. [Retrieved from].

Martins-Filho, C.,& Bin, O. (2005).Estimation of hedonic price functions via additive nonparametric regression. Empirical and Economics, 30, 99-114.

Mishkin, F.S.,& Schmidt-Hebbel, K. (2001). One decade of inflation targeting in the world: what do we know and what do we need to know? NBER Working Paper, No.w8397. doi. 10.3386/w8397

Mishkin, F.S. (2007). Housing and the monetary transmission mechanism, NBER Working Paper, No. w13518. doi. 10.3386/w13518

Moore, B. (1981). Principal component analysis in linear systems: Controllability, observability, and model reduction. IEEE Transactions on Automatic Control, 26(1), 17-32. doi. 10.1109/TAC.1981.1102568

Murialdo, F. (2013). Practice of Consumption and Spaces for Goods. Francesca Murialdo.

Ons.gov.uk. (2017). Consumer Price Inflation time series dataset - Office for National Statistics. Accessed 2 Jan. 2018.[Retrieved from].

Ons.gov.uk. (2017). Gross Value Added (GVA) - Office for National Statistics. Accessed 1 Jan. 2018.[Retrieved from].

Poterba, J.M., Weil, D.N.,& Shiller, R. (1991). House price dynamics: the role of tax policy and demography. Brookings Papers on Economic Activity, 1991(2), 143-203.

Pyhrr, S., Roulac, S.,& Born, W. (2004). Real estate cycles and their strategic implications for investors and portfolio managers in the global economy. Journal of Real Estate Research, 18(1), 7-68. doi. 10.5555/rees.9.4.t21866r7h4406x20

Quigley, J.M. (2006). Economic fundamentals in local housing markets: evidence from US metropolitan regions. Journal of Regional Science, 46(3), 425-453. doi. 10.1111/j.1467-9787.2006.00480.x

Reed, R.,& Reed, R. (2016). The relationship between house prices and demographic variables. International Journal of Housing Markets and Analysis, 9(4), 520-537. doi. 10.1108/IJHMA-02-2016-0013

Shiller, R.J. (1990). Speculative prices and popular models. Journal of Economic Perspectives, 4(2), 55-65. doi. 10.1257/jep.4.2.55

The Pennsylvania State University, (2018). Lesson 11: Principal Components Analysis (PCA). Accessed 26 Dec. 2017.[Retrieved from].

Yihong, X.(2016). A Study on the Influence Factors of Real Estate Prices Based on Econometric Model: A Case of Wuhan. DEStechTransactions on Social Science, Education and Human Science, [Retrieved from].




DOI: http://dx.doi.org/10.1453/jeb.v5i1.1609

Refbacks

  • There are currently no refbacks.


.......................................................................................................................................................................................................................................................................................................................................

Journal of Economics Bibliography - J. Econ. Bib.  - JEB - www.kspjournals.org

ISSN: 2149-2387. Editor : editor-jeb@kspjournals.org   Secretarial: secretarial@kspjournals.org   Istanbul - Turkey.

Copyright © KSP Journals