A BI-REGIONAL CGE MODEL OF THE SOUTH WEST HOUSING MARKET
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Volatility within the UK housing market is thought to be a significant factor driving instability in the wider macro economy. Research investigating the characteristics and behaviour of the housing market has suggested that under supply of housing is one of the key reasons for the high and increasing levels of house prices the nation has recently been experiencing. Consequently, much of the current government's housing policy is aimed at increasing the level of supply by reforming the planning system and increasing investment in the development of new housing. Under supply is also a major concern at the regional level, particularly in the South West, where net inward migration, growth in the number of single person households and growth in the numbers of second homes is placing increasing pressure on the housing market. Understanding the likely effects of any policy changes prior to their implementation is vitally important for a successful outcome and to that end economic analysis has played a significant role in the development of policy at the national level. However, this is not the case at the regional and sub-regional levels where only limited use of economic analysis techniques have been made, partly due to resource issues and partly due to the lack of regional data. In order to partially address the lack of analysis of the regional impacts of the latest housing policies, this study is based upon the development of a mathematical economic model of the South West housing market. This model is then used to estimate the likely impacts of increasing housing supply at both the regional and broad sub-regional levels.
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