Price-quantity interactions in the market for new housing in Northern Ireland

The aim of this paper is to construct a model of the market for new housing in Northern Ireland capable of forecasting the prospects of the housebuilding industry, and of simulating the effect of policy initiatives. Much of applied work on housing markets has concentrated on the equilibrating role of prices. In the market for new housing this effect is complicated by the physical lags involved in the supply side response. The paper develops a simple theoretical framework in which price adjusts to equilibrate demand and current supply. A reduced form price change equation is used to model any imbalance of current demand and housing completions. The model is estimated using data for Northern Ireland, and the implications of the results for the management of regional housing markets are discussed