We explore the nature of spatial diffusion of demand in regional housing markets in England. Our structural model, at the regional level, includes a demand function and a rental adjustment relationship expressed in terms of prices. We use a microeconomic model of housing market matching and search to identify the wedge between demand and supply, using data on time-on-the-market and degree of overpricing. We model space using different alternative notions, such as geographical distance, travel time, transport costs and socio-cultural distance. This methodology enables us to capture the nature and socio-economic drivers of pricechange diffusions in space and time more explicitly, and to derive implications for housing and land-use policy.