House price appreciation, transactions and structural change in the British housing market: A macroeconomic perspective

This paper constitutes the first of two interrelated studies and is concerned with the relationship between house prices and transactions. Using aggregate time-series data, we find a strong relationship in Britain between the two variables, but the relationship changed during the 1990s. Transactions became much lower. We suggest that structural changes in macroeconomic relationships are increasingly likely to occur in a world of greater inequality and our results are one symptom. We argue that macroeconomic estimation needs to be complemented by careful microeconomic analysis. The second study, also appearing in this issue, therefore examines the microeconomic aspects of the issue.