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Short-Term Forecasting of Housing Investment: A Note

Published online by Cambridge University Press:  26 March 2020

A. R. Nobay
A. R. Nobay*
Affiliation:
National Institute
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Extract

This note discusses methods of forecasting investment in housing in Britain for twelve to eighteen months ahead. The first section discusses the figures for housing investment, and the way in which they are compiled. The second section sets out what is at present done at the Institute in the preparation of quarterly forecasts. The third section describes a preliminary exploration of more satisfactory ways of forecasting private housing demand.

Type
Research Article
Information
National Institute Economic Review , Volume 41 , August 1967 , pp. 41 - 47
Copyright
Copyright © 1967 National Institute of Economic and Social Research

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References

note (1) page 41 The term ‘housing’ is used throughout, to mean the same as the official term ‘dwellings’.

note (2) page 41 A register of firms whose major activity is construction is maintained by the Ministry of Public Building and Works in co-operation with the Board of Trade. The sample is based on information collected in April each year when every firm is asked to make a return of numbers employed and work done. Returns are required every month from the larger firms : and estimates are published monthly for orders and employment. In addition, a changing sample of small firms is asked for information every quarter : and the estimates of work done are quarterly. About 18 thousand firms are usually included in the quarterly return and these are responsible for nearly 80 per cent of the employment and value of work done in the industry.

note (3) page 41 In May 1965, the figures for the first three quarters of 1964 were revised up by 3 per cent. In May 1966, the figures for the first three quarters of 1965 were revised up by 2½ per cent. In May 1967, the figures for the first three quarters of 1966 were revised down by 2 per cent.

note (3) page 41 In 1966, direct labour accounted for 10 per cent of tenders approved for local authorities and new towns.

note (1) page 42 There are also some small differences in coverage and definition between the Ministry of Public Building and Works figures and those of the Central Statistical Office. They include the switch from public to private housing of the building done by private housing associations, which is included in the public sector by the Ministry of Public Building and Works.

note (2) page 42 See footnote to chart 2.

note (3) page 42 See footnote (a) to chart 3 for the method of calculating the number of houses built.

note (4) page 42 These higher standards include greater floor space, better heating, more kitchen fitments and bedroom cupboards, and additional electric socket outlets. The proportion of tenders approved with the six main Parker Morris standards increased from 14.2 per cent in 1964 to 40.2 per cent in 1966.

note (1) page 44 Regressions were fitted to figures of starts and figures of orders in the current quarter and in previous quarters. Although the degree of association increased with successive additions of the figure of orders of previous quarters (up to the figures of orders four quarters previously), the highest R2 was only 0.73 for the public sector and 0.63 for the private sector. Further, some of the regression coefficients were negative.

note (2) page 44 The point is discussed in the forecast of investment, in the review of the economic situation on page 11.

note (3) page 44 It would be useful if, together with the starts figures, estimates were collected for the eventual estimated value of the houses.

note (1) page 45 A relationship was also calculated between investment and starts, houses under construction, and the average construction period :

log It=α00.791703+α1 log St0.496565(0.0023)+α2 log UCt0.613771(0.0023)+α3 CTt0.672932(0.0135)R2=0.961VN = 1.1156

I=investment at constant prices, S=starts, UC=under construction, CT=average construction period, t=time period. However, it was not as satisfactory for prediction purposes as the equation given in table 1.

note (1) page 47 44 per cent of output is produced by firms with under 25 persons (1958 Census).

note (2) page 47 See Appendix, page 48.