…and from place to place.

The third of a four-part mini-series written by economist Savvas Savouri.

Housing matters are a crucial component in the composition of our regional outlook for the UK. One aspect is affordability and with this in mind, we assign positive weight to regions where the ratio of private sector rents to private sector incomes are comparatively lowest. We use the same reasoning – that there is a growth benefit to be derived from the affordability of rental housing – to positively weight regions which are home to the most affordable homes to own; as captured by a comparatively low ratio of regional house prices to private sector incomes.

By considering relative regional house prices, we argue that regions whose homes are comparatively cheap will enjoy a favourable degree of affordability arbitrage, and as a result, see net inwards movement. What we mean here is that we will very likely see homeowners in regions with comparatively high house prices ‘cashing-in’ to trade-up the property size and quality ladder (all the more the case if more affordable regions are close by to expensive ones).