TESTING FOR CONVERGENCE BETWEEN UK REGIONAL HOUSE PRICES

This paper uses the Kalman filter/time varying parameter estimation technique to test for convergence between UK regional house prices. This issue is significant given the historical disparities in regional house price inflation rates and the unprecedented downturn in both UK and most regional house prices in the late 1980s and early 1990s. The evidence suggests that there are clear regional differences in the pattern of UK house price movements. In particular, house prices in the North and Scotland show evidence of greater divergence from prices in the Rest of the South East region than do the Southern and Midlands regions.