Disposable income: a leading indicator for house price trends? – The Property Chronicle
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Disposable income: a leading indicator for house price trends? Our team of Cambridge University academics look at a key statistic

Chart Spotlight

The chart suggests that the housing market boom since 2013 has not been the result of the low interest rates; instead, real income growth might be a key driver.

Our analysis leads us to conclude that real interest rates don’t seem to influence house prices in an effective manner. Looking at the chart, between 2006 and 2008 house prices kept growing, despite increasing real interest rates. After the financial crisis in 2008 when real interest rates declined sharply, and remained at very low levels (less than 0.3), house prices just bounced up slightly and remained stable until 2013.

The growth rate of real disposable income per head, however, has a similar shape as the house price index, and in our view is a leading indicator for house price trends.






Chart Spotlight

About Charlotte Chunming Meng

Charlotte Chunming Meng

Charlotte Chunming Meng is a PhD candidate in Real Estate Finance in the Department of Land Economy, University of Cambridge. Her research focuses on the behaviours of participants in the residential real estate market. She acquired her BA degree in Finance and Mathematics at Renmin University of China. Charlotte can be contacted at cm794@cam.ac.uk.

Articles by Charlotte Chunming Meng

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