ABSTRACT
The late 1980s and early 1990s have seen extensive debate in Britain on the role of house price inflation and housing wealth on consumer spending and the state of the economy as a whole (Boleat, 1994; Bowen, 1994; Clapham, 1996; Costello and Coles, 1991; Cutler, 1995; Ermisch, 1990; Meen, 1995; Miles, 1992a and b; Muellbauer, 1990c; Pannell, 1992). The debate revolves around the extent to which the housing market reinforced or generated fluctuations in the national economy during both booms and slumps. More specifically, it focuses on the relation between rising house prices and equity during the late 1980s, the increase in consumer spending between 1986 and 1988 and the associated fall in personal savings. The concern was reversed in the early 1990s, when debate centred on the links between falling house prices and sales, higher levels of mortgage debt, stagnant consumer spending, the rise in the saving ratio and the continuing recession. The debate is important, because it was commonly argued in the early 1990s that a recovery in the home ownership market was the key to wider economic recovery in Britain. As such, the home ownership market is now seen to play a central role in both economic growth and recession in Britain. This does not seem to be the case in other countries and it is important to examine the argument and its validity.
