An Investigation of Housing Affordability in the UK Regions

Montagnoli, Alberto and Nagayasu, Jun (2013) An Investigation of Housing Affordability in the UK Regions. Discussion paper. University of Strathclyde, Glasgow.

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    The housing market has been extensively investigated in the literature; however there is a lack of understanding of the fundamentals affecting housing affordability across UK regions as measured by the price to income ratio. The aim of this paper is twofold; firstly we calculate the affordability ratio based on individuals’ incomes. Second we set off to ask which socioeconomic factors could affect this ratio. The analysis finds a strong influence coming from the mortgage rate, the residents’ age and academic qualifications. We also report a positive and significant effect from foreign capital coming to the UK. Finally, we record a non-negligible degree of heterogeneity across the twelve regions.