THE ROLE OF PRICE EXPECTATIONS IN THE U.K. MARKET HOUSING
||Thomas, D. Gareth; Bywaters, David
||THE ROLE OF PRICE EXPECTATIONS IN THE U.K. MARKET HOUSING
||17th Annual European Real Estate Society Conference in Milan, Italy
||The objective of this paper is to show the role of survey data published by Royal Institution of Chartered Surveyors (RICS) in forecasting subsequent U.K. house prices, three months ahead. Both the Halifax and the Nationwide indices are used to test the performance of the RICS survey based on bounded rationality. Bounded rationality means that various agents, such as buyers, sellers, estate agents and chartered surveyors, play differing rôles in the overall formulation of expectations of prices. An S-shaped logistic effect with a diffusion path of expectations from surveyors to other agents is assumed. The empirical analysis makes use of the forwarding-looking price expectations data published by Royal Institution of Chartered Surveyors (RICS) with the actual observations produced by Mortgage lenders, the Halifax and the Nationwide. The study provides econometric evidence for the validity of the logistic formulation and shows that bounded rationality can explain the predictions of agents. The conclusions from this paper is that the logistic function is a superior approximation to the true data generating process compared with the earlier standard Anderson/Pesaran/Thomas approach. An adjustment to the survey is used, which achieves perfect symmetry with ‘up’ and ‘down’ versions of the data, which is also tested.
||Housing, Price Expectations and forecasting
||file.ppt (270,336 bytes)
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||Housing Economics (4)
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