Modelling regional house prices in the UK

Maximum likelihood cointegration methods are used to analyse the determinants of house prices in each of the eleven regions of the UK. Broad similarities in the structure of house price equations are found across regions in England and Wales (bur not Scotland or Northern Ireland), indicating that the source of differences in English and Welsh regional house prices should probably be sought in different regional incomes, opportunity costs, and housing starts. Tests of spatial dependence in regional house prices cast doubt on the well-known 'ripple effect' hypothesis.