Dynamics of Housing Affordability and Effects of Regional Migration: Evidence From England and Japan

Abstract: This study aims to identify the primary driving forces behind the recent high appreciation in housing prices, discover how regional mobility influences housing affordability, and determine what policies are effective to address the problem. To do this, we estimate the structural model of housing prices and regional mobility using 2012/2013 to 2020/2021 panel data for England and Japan. The results reveal that the housing market in England is quite responsive to changes in expected housing price appreciation and that regional mobility alleviates the housing affordability problem; however, the Japanese housing market lacks mobility and is responsive to the supply of new houses. Regional mobility in England was driven expected wage and house prices, which alleviated the negative effect of increased house prices and contributed to convergence of regional differences in affordability. In both countries, increased share of parttime workers would invite workers’ inflow and worsen the affordability. To address these issues, each country has implemented different policies, with varying degrees of effectiveness. The British government has targeted a substantial increase in housing supply, but it should be associated with measures for curving the expectation of house price appreciation in urban regions. The Japanese government, on the contrary, should increase housing stock by renovating vacant houses and liquidate the labour market.

Key words: housing affordability, regional migration, convergence, parttime workers

JEL codes: J6, R11, R23, R31