Consumer Durables Spending and Housing Market Activity

Recent British experience suggests important relationships between housing market activity and consumer durables spending. This paper examines direct and indirect relationships; the former through the complementarity of housing and durable goods, the latter through housing equity withdrawal effects. Aggregate U.K. time-series econometric evidence is presented that finds significant evidence for both effects. An estimate of the elasticity of durables spending with respect to house prices of 0.4 is obtained for 1988. The authors conclude that this is further evidence of the important role of the housing market in the U.K. macroeconomy.