Does inequality really matter in forecasting real housing returns of the United Kingdom?

Abstract

In this paper, we analyze the potential role of growth in inequality for forecasting real housing returns of the United Kingdom. In our forecasting exercise, we use linear and nonlinear models, as well as measures of absolute and relative consumption and income inequalities at quarterly frequency over the period 1975–2016. Our results indicate that, while nonlinearity in the data generating process of real housing returns is important, growth in inequality does not necessarily carry important information in forecasting the future path of housing prices in the United Kingdom.