Inter-regional rail travel and housing markets connectedness between London and other regions

Abstract

Taking London as a location with which to measure the ripple effect in the UK housing market, this study aims to explain and verify the high degree of correlation between inter-regional transportation and the regional correlation of the housing market. Based on the literature on the relationship between short-term mobility and long-term migration, this paper illustrates that the extent to which people use trains for travel across regions will be related to the ripple effect in the regional housing markets. Frequent railway transport behavior, whether for commuting or traveling, might increase people's desire to relocate between regions, and thus leading to information transmission effects across regional housing prices and transaction volume. First, we estimate a dynamic indicator for the ripple effect. Then, the empirical tests use panel data, including the ripple indicator and passenger number data across time (1996–2022) and regions (nine regions). It is found that if London house prices drive other regional house prices to rise, inter-regional transportation demand will increase, and in turn, the increase of house prices in other housing markets will again drive up London house prices. The number of passengers will affect the information transmitted by the housing market transaction volume in other regions to the London housing market. This implies that higher inter-regional transport needs may lead to migration between London and other property markets, causing their transaction volumes to change in the same direction. The results of this paper verify that travel behavior between regions is a crucial factor in the leading/lagging behavior of regional housing market performance, implying a relationship between short-term travel and long-term migration. The results also indicate that incorporating variables of housing market correlations may help in the prediction of passenger numbers or transportation demand.