Abstract

The work makes two contributions to Hui’s (2011) dynamic house price classification. First, a house price ripple in cycles from Modern to Older dwellings is revealed and, second, as New housing is shown to have lower volatility than the other two. Using spectral analysis, it is argued that there is a 7½-year repeat buyer-second-hand cycle and a five year, first time buyer-New housing cycle, common to three house price vintages. These cycles reinforce each other every fifteen years, which corresponds with a Minsky super-cycle in housing finance.
The equity of the owner-occupier is fortified by higher house prices whereas new builds extract embedded equity from the market. Government should support builders and facilitate access to market to first time buyers and through programmes like Help-to-Buy 1. However, to address the greater price instability that should follow, Government should impose a capital gains tax on the house seller.