Academic literature on the topic 'Housing Price-to-Rent Ratio'

Purpose The purpose of this paper is to highlight the relation between the loan-to-value (LTV) ratio and the price-rent (PR) ratio. The paper intends to relate the PR-ratio to housing return and the potential for a leverage gain in housing investments by considering the funding structure of housing investments. Design/methodology/approach Combining a PR-ratio approach with the housing return in the case of mortgage-financed housing, as presented by Borgersen and Greibrokk (2012), this paper relates LTV to the PR-ratio. Findings When formalising the relationship between leverage and housing return, as given by Muellbauer and Murphy (1997), the paper finds the effect of a higher LTV on the user cost of housing as the net effect of a higher borrowing cost and the associated leverage gain. The latter depends on the relationship between house price growth and the mortgage rate and, because the leverage gain has an ambiguous effect on the user cost of housing, the relation between the LTV-ratio and the PR-ratio is context-specific. Originality/value The paper aims to contribute to the literature on PR ratios in two ways. First, by explicitly including the LTV-ratio in the user cost of mortgage financed housing and, correspondingly, in the PR-ratio derived from the user cost. Second, by including the funding structure of housing investments the expression for the capital gain, which often is discussed in the PR-ratio literature, is related to the funding structure and includes both a price gain and a leverage gain.

We examine the sum of the net rent-price ratio plus the expected real capital gains, which is the real return to holding a house. The rent-price ratio depends on expectations about interest rates, inflation, and real house prices. The shock coefficients are their incidences, which are the proportions of risk that occupants bear. Occupants are on the demand side, as tenants or owners. For U.S. houses with quarterly data between 1981 and 2016, these incidences are below 0.15, limiting rent-price volatility. The low-volatility yield forces real capital gains to near zero, leading houses to bond-like returns.

Studies have typically adopted the price-rent ratio to determine whether housing exuberance exists and the periods of imbalance between house prices and rental costs. Using the price-rent ratio to conduct tests without considering the effects of mortgage interest rates on user costs may overestimate episodes of exuberance. This study uses data of the overall housing market and those of 10 major metropolitan statistical areas (MSAs) in the United States from 1979Q1 to 2018Q1 to evaluate whether housing exuberance exists in the markets; the results indicate that all the MSAs experienced episodes of exuberance at different times and the overall housing U.S. market was overheated from 1998Q2 to 2007Q3. By considering mortgage rates and using the user-cost-rent ratio, we further determine that short-term housing exuberance emerged in only two MSAs, Los Angeles and Miami, in 2006Q2, which was followed by immediate corrections. Thus, the research results of this study signify that only use the price-rent ratio to determine whether or not rational housing tenure choice made by traders exists is not sufficient. This study provides evidence showing that the method incorporating mortgage interest rates tends to obtain an equilibrium relationship between the rental and housing markets, indicating interest rates play an important role in housing tenure choice.

It has been a hot topic concerning about whether price bubbles exist in the housing market in several cities in China or otherwise. However, much of the debate lacks convincing evidence. This paper discusses the two factors which may lead the housing price to deviate from its fundamental value: rational bubble and economic irrationality. Also, the paper considers the price‐rent ratio as a valid indicator in reflecting the rationality of the housing price. Based on an international comparative study and the Income Capitalization Method, this paper will show that the proper interval of the price‐rent ratio in China's housing market should be around 150–200. At the end of this paper, an empirical study will be presented after an alternative measurement method for China's housing market is proposed. It will illustrate that housing prices in Shanghai and Hangzhou are overvalued while that in Beijing and Guangzhou are comparatively closer to the proper interval.

This paper develops a theoretical model for equilibrium rent-to-price ratios from the competition between households and investors in the housing market. Households make their housing tenure choice in terms of rent vs. buy such as minimizing the cost of occupying a housing unit. On the other hand, investors choose between investing in rental housing vs. other investment opportunities in order to maximize their net present value. In the face of limited housing inventory, households and investors bid against one another which determines the allocation of the housing units among households (owner occupied properties) and investors (rental properties). We derive the sensitivity of the equilibrium rent-to-price ratio with respect to various market parameters, and subsequently analyze their potential impacts on the homeownership rate in the community. We show that some government mortgage programs subsidize homeownership to increase the affordability of owning a house, but may also provide even more incentive to the housing investors. Unless the government can effectively control the eligibility of borrowers, such affordable mortgage programs could work against their objectives and lead to higher housing prices and lower homeownership rates. Our model framework can be used to analyze the potential impacts of some of the new affordable housing policies on house prices or homeownership rates before adopting them.

The study attempted examination of the effects of access to land on housing affordability in Abuja, Nigeria. Sample population for the study was made up of 5,502 houses selected by purposive sampling techniques in the Six Area Councils in Abuja. The research adopted the 30% Bench Mark using Simple Housing Cost to Income Ratio, for measuring housing affordability status of residents. The 30% Benchmark is widely acceptable due to its simplicity, reliability, time and its effectiveness across markets. (Christopher et al;(2018), Desmond. M (2016). Hulchanski J.D(1995), Joint Center for Housing Studies of Havard University State of Nation’s Housing (2017). Results of analysis indicates that the resident’s median household income is between ₦300,000 to ₦1 million naira only. It was also observed, that there existed a gradual reduction in Median House price, Median Rent and Median Land Price with decrease in the location of Settlements, from the Abuja Central Business District. Therefore, the research revealed, that Median House price, Median Rent and Median land price is far above the acceptable 30% Bench mark for measurement of housing affordability Condition. Expressively, the research observed that Abuja Residents are experiencing worsening housing affordability condition. Access to land was further examined in relation to other identified factors that affects housing affordability, using Likert Scale. The Study thus concluded that, the most important factor that affects housing affordability in Abuja is access to Land. This factor is rated highest (Mean = 5.83, Standard deviation=1.33).

The price-to-rent ratio, a common yardstick for the value of housing, is difficult to estimate when rental properties are poor substitutes of owner-occupied homes. In this study, we estimate price-to-rent ratios of residential properties in two major cities in China, where urban high-rises (estates) comprise both rental and owner-occupied units. We conduct Bayesian inference on estate-specific parameters by using information of rental units to elicit priors of the unobserved rents of units sold in the same estate. We find that the price-to-rent ratios tend to be higher for low-end properties. We discuss economic explanations for the phenomenon and the policy implications.

We apply the dynamic Gordon growth model to the Hong Kong real estate market to analyze quarterly data on four kinds of real estate—housing, office, retail, and factory properties—from 1999 to 2020. We find that factories have the highest total returns among the four types of real estate, and also a larger Sharpe ratio. The total returns of these four kinds of real estate are highly correlated. The results of an autoregressive distributed lag model show that the gross domestic product growth rate is the key determinant of real estate returns, while changes in foreign direct investment also influence housing and retail returns. The expected value of the risk-free rate is the key factor that determines the rent-price ratio. The decline in the risk-free rate in Hong Kong is the main reason that the real estate price-rent ratio has increased from 20 to 40 in the last twenty years. Our research represents an early contribution that compares the performance of housing and commercial real estate at the city level, with both types of real estate having similar determinants. Finally, we find that the fall in risk-free interest rates worsens housing affordability in Hong Kong.

The rent-to-price ratio is one of the popular indicators for monitoring the property market. This study explores micro-scale spatial dynamics of the ratio for houses at the individual property level in Seoul, South Korea. We match the apartment unit sold and the one leased based on the carefully chosen criteria and apply a Bayesian multi-level modeling approach to this matched dataset. We employ the Integrated Nested Laplace Approximations (INLA) algorithm in order to estimate relevant parameters in the multi-level model. The ratio determinants found in the study include property age, apartment unit area, interest rate, and floor. This study also presents the importance of taking into account the hierarchical structure of apartment units, as well as seasonal and spatial variations when estimating the ratio and predicting future trends in the property market based on the ratio.

The Swedish housing market has been subject to extensive attention in the media recently, and the existence of a housing bubble has been questioned. The purpose of this thesis is to analyse the Swedish housing market to investigate if there are reasons to believe that the market is overvalued. The current situation in the housing market will be compared to the United States market prior to the crash of 2007. The models that are used in the paper is the house price-to-income, price-to-rent and imputed rent-to-rent. Other fundamental factors such as rent control, household debt, interest rates, and other policies effecting the housing market will be discussed. The main findings indicate that the Swedish housing market in 2010 is overvalued, however one has to consider that there are limitations to these models such as the extra benefits of owning a house compared to renting.

The Swedish housing market has been subject to extensive attention in the media recently, and the existence of a housing bubble has been questioned. The purpose of this thesis is to analyse the Swedish housing market to investigate if there are reasons to believe that the market is overvalued. The current situation in the housing market will be compared to the United States market prior to the crash of 2007. The models that are used in the paper is the house price-to-income, price-to-rent and imputed rent-to-rent. Other fundamental factors such as rent control, household debt, interest rates, and other policies effecting the housing market will be discussed. The main findings indicate that the Swedish housing market in 2010 is overvalued, however one has to consider that there are limitations to these models such as the extra benefits of owning a house compared to renting.

<p>Abstract</p><p>The topic of an overheated housing market, in Sweden, has been extensively discussed, not least by the media. This thesis will contribute to the debate by answering the question whether a potential price bubble exists in the Swedish housing market. Years between 1984 and 2004 are analysed using conventional metrics, which include house price-to- rent and income ratios respectively, changes in the dynamics of real house prices, as well as demographic variations. The analyse continues with the use of the imputed rent, also known as the yearly cost of ownership. Moreover the fundamental factors; interest rates, indebtedness and turnover of houses are discussed.</p><p>It will be concluded that the conventional measures can be misleading. The imputed rent is a superior measure since it is the true cost of ownership and it accounts for changes in important determinants of house demand, mainly the interest rate. The answer to the title of this paper is; no, house prices (in 2004) in Sweden did not appear to be particularly overvalued, neither when compared to yearly rents in the tenancy market, disposable incomes, nor when low levels of interest rates are taken into account. However, this does not rule out that house prices cannot fall in the near future.</p><br><p>Sammanfattning</p><p>Denna kandidatuppsats behandlar ämnet om en möjlig husprisbubbla i Sverige. Sedvanliga tekniker som används vid analysering av prisbubblor innefattar användandet av proportionen mellan huspriser och hyror samt disponibla inkomster. Även dynamiken i reella huspriser och demografiska förändringar utvärderas.</p><p>I denna analys jämförs åren mellan 1984 och 2004 genom att använda “imputed rent”, vilken representerar den årliga kostnaden av ägande. Även fundamentala faktorer som räntan, skuldsättningen samt omsättningen av hus undersöks. Den slutsats som uppsatsen resulterar i understryker att de sedvanliga bruken kan vara vilseledande och att ”imputed rent” är en bättre teknik. Detta eftersom ”imputed rent” representerar den verkliga kostnaden av ägande samt inbegriper viktiga avgörande faktorer, som räntan. Därför är svaret på titeln; nej, huspriserna (år 2004) i Sverige förefaller sig inte vara särskilt övervärderade, när de jämförs med årliga hyror av likvärdiga hyresrättslägenheter och disponibla inkomster, samt när hänsyn tas till den låga räntan. Detta utesluter dock inte en framtida nedgång av huspriserna.</p>

Le marché du logement se compose de deux segments principaux, le marché locatif et le marché de la vente. Bien que ces deux marchés fonctionnent différemment, les prix sur les deux marchés sont naturellement soumis à des interactions réciproques : le niveau des loyers affecte les prix de vente, mais les prix sur le marché de vente ont un impact sur les loyers. Dans la première approche, les loyers sont convertibles en prix de vente par une formule de capitalisation. Cependant, il est possible, et empiriquement observé, qu'il existe des déséquilibres entre les deux marchés. Ainsi, la dynamique relative des prix et des loyers peut varier dans le temps, mais aussi dans l'espace d'une zone urbaine : comment les prix sur les deux marchés (vente et location) sont-ils liés ? Comment l'un affecte-t-il l'autre ? La relation entre les deux prix est-elle homogène dans l'espace ? Pourquoi certains quartiers d'une agglomération ont-ils des loyers trop bas par rapport aux prix d'achat ? Cesquestions présentent un intérêt particulier pour les acteurs locaux de la politique du logement, dans un contexte de fortes tensions sur le marché du logement comme c'est le cas dans l'agglomération lyonnaise. En particulier, elles sont étroitement liées aux politiques visant à soutenir l'offre de logements ou le niveau des loyers du marché. Cette thèse propose d’étudier les liens entre ces deux marchés.Le premier chapitre de cette thèse tente d'observer si les ratios loyer/prix varient à l'intérieur d'une zone urbaine et cherche à expliquer les écarts entre les ratios loyer/prix, s'ils existent. Après avoir recalculé les ratios loyer sur prix dans l’agglomération, nous observons une hétérogénéité spatiale de ceux-ci. Dans une seconde partie de cette contribution, nous développons un modèle de « tenure choice » qui nous permet de mettre en avant des mécanismes théoriques qui expliquent les variations spatiales de ratio loyer/prix.Le deuxième chapitre de cette thèse porte sur la relation entre les prix du marché du logement privé et la construction de logements sociaux. Dans cette première contribution empirique, nous testons l'impact de la loi SRU sur le prix des logements en utilisant une méthode à double différence. Les résultats indiquent qu'à mesure que le retard de la municipalité dans l'atteinte des objectifs de la SRU augmente, il entraîne une augmentation de la construction de logements sociaux et, finalement,une diminution du prix des logements privés de la municipalité. Nous utilisons aussi une méthode de régression de discontinuité utilisant le seuil de 3500 habitants. Les résultats de cette deuxième analyse suggèrent que la construction de logements sociaux a eu un impact négatif sur le prix des logements dans les municipalités de plus de 3500 habitants.Aujourd'hui, il existe plusieurs politiques qui encouragent les propriétaires à louer des logements à loyers modérés ou qui tentent de faciliter l'accès à la propriété. Néanmoins, si ces politiques ont déjà été étudiées, ce troisième chapitre tente de comprendre leurs impacts combinés sur le marché du logement privé. En particulier, nous essayons de montrer l'impact des politiques de soutien à l'achat et à la location et des politiques de prêts à taux zéro. La première étape de notre contributionconsiste à concevoir un modèle théorique. Ce modèle théorique met en évidence les effets de chacun des deux mécanismes et met également en évidence la réaction du marché du logement lorsque chacun des deux mécanismes est couplé à une politique de contrôle des loyers. Dans une analyse empirique, nous vérifions si les prédictions du modèle précédemment développé sont valides. Les résultats indiquent que l'impact de la réforme sur le prix des logements neufs est positif.La dernière étape de notre analyse est une méthode à triple différence qui indique que la croissance du prix des logements neufs s'accélère en présence d'un contrôle contraignant des loyers<br>The housing market consists of two main segments, the rental market and the sales market. Although these two markets operate differently, prices on the two markets are naturally subject to reciprocal interactions: the level of rents affects prices of sale, but prices on the sales market have an impact on rents. On the first approach, the rents are convertible into a selling price by a capitalization formula. However it is empirically observed that imbalances exist between the two markets. Thus, the relative dynamics of both prices and rents can vary over time, and also in the space of an urban area. How are prices in the two markets (sale and rental) related? How does one affect the other? Is the relationship between the two prices homogeneous in space? Why is it that some neighborhoods of an agglomeration have rents that are too low in relation to purchase prices? These questions are of particular interest to local policy actors in housing, in a context of strong tensions on the housingmarket as is the case in the Lyon conurbation. In particular, they are strongly linked to policies aimed at supporting the supply of housing or the level of market rents. This thesis aims to study the link between these two markets.The first chapter of this thesis attempts to observe whether rent to price ratios vary within an urban area and seeks to explain the differences between rent to price ratios, if they exist. After recalculating the rent to price ratios in the agglomeration, we observe a spatial heterogeneity of them. In the second part of this contribution, we develop a "tenure choice" model that allows us to highlight theoretical mechanisms that explain spatial variations in the rent to price ratio.The second chapter of this thesis deals with the relationship between private housing market prices and the construction of social housing. In this first empirical contribution, we test the impact of the SRU law on house prices using a double-difference method. The results indicate that as the municipality’s delay in achieving the SRU's objectives increases, it leads to an increase in the construction of social housing and, ultimately, a decrease in the price of the municipality's private housing. We also use a discontinuity regression method using the 3500 population threshold. The results of this second analysis suggest that the construction of social housing has had a negative impact on private housing prices in municipalities with more than 3500 inhabitants.Today, there are several policies that encourage landlords to rent low-rent housing or that attempt to facilitate access to home ownership. Nevertheless, while these policies have already been studied, this third chapter attempts to understand their combined impacts on the private housing market. In particular, we try to show the impact of purchase and rental support policies and zero-interest loan policies. The first step in our contribution is to design a theoretical model. This theoretical modelhighlights the effects of each of the two mechanisms and also highlights the reaction of the housing market when each of the two mechanisms is coupled with a rent control policy. In an empirical analysis, we check whether the predictions of the previously developed model are valid. The results indicate that the impact of the reform on new housing prices is positive. The last step in our analysis is a triple-difference method that that the growth of new housing prices accelerates in the presence oftight rent controls

碩士<br>國立政治大學<br>地政學系<br>106<br>In recent years, housing prices in Taipei have been rising sharply without significant increase in rents. Gross rent multiplier (price/rent, i.e., GRM) is an important indicator of real estate market. Prices can be regarded as the sum of the consumption value and the investment value. In contrast, rents show only consumption value. Therefore, a rise in the gross rent multiplier means that buyers think the investment value is increasing. However, there are many factors that affect housing prices and rent, and cannot be analyzed using only average price or rent. To clarify the individual differences in housing, this paper measures the GRM for each house and calculates the impact of housing features, location and time on the gross rent multiplier to discuss the interaction between investment and consumption. 　　This study uses housing sale and rental data in Taipei City from January 2013 to December 2016. The rental model is formed by using hedonic price theory to calculate the GRM. Then the GLS model and quantile regression is used to analyze the GRM. The result shows that location and time are the main contributors for the change of investment value. The GRM in Taipei city average about 50. They are higher for large properties located in downtown and bought at market’s peak. The highest quantile result indicates that the GRM in downtown area are higher than others quantile, thus the capital gain in downtown makes investment value increase. The empirical result can clarify the phenomenon in Taipei City, and contributes to future policy making.

The housing bust in Spain was characterised by a significant and rapid drop in home ownership among the younger cohorts, a relatively homogeneous but significant decrease in consumption and significant movements in the rent-to-house price ratio. To uncover the causes of these movements, we solve and estimate an equilibrium life-cycle model with non-linear income, mortgage and housing and rental market dynamics, and simulate a series of counterfactual policy changes and macroeconomic conditions observed in Spain during the period. The lion’s share of the observed drop in home ownership and consumption and the housing market dynamics can be explained by the tightening of credit conditions and the major shift in income dynamics observed in Spain between the boom and bust phases.