Distributed Lag Behaviour in the Housing Market: Some Further Evidence

This article is a study of the distributed lag relationship between completions and starts of private dwellings in the UK and extends some results previously published in this journal. The main finding confirms that a proper study of builders' behaviour, as manifested in the distributed lag relationship between completions and starts, must allow for both disequilibrium effects and time varying lag structures. However, in examining the economic variables that modified builders' behaviour (and hence the lag structure) it was found that both the rate of house price inflation and the level of building society mortgage advances had an important influence. An increase in both caused builders, in the expectation of easier sales, to quicken their rates of completion. Additional plausible influences — like the level of construction activity in the public sector were, however, not supported by the data.