House building and product differentiation: An hedonic price approach

This paper considers the extent to which the UK house building industry is competitive: an area neglected by the existing housing market and housing submarket literature. The paper presents an analysis designed to test the hypothesis that house builders are able to differentiate or 'brand' their output. Statistics on private house building output and the number of firms in the industry indicate that it is dominated by large (volume) house builders in terms of output share. The empirical analysis draws on a dataset comprising 1,155 new housing transactions with physical attributes and transaction prices for Glasgow between 1989 and 1992. Hedonic regression models are constructed and Chow tests are performed in order to test the null hypothesis of product homogeneity between house builders. The results provide indications that house builders differentiate their output since statistically significant differences in house prices that are not related to physical housing characteristics are identified.