Analyzing the Rent-to-Price Ratio for the Housing Market at the Micro-Spatial Scale

Lee, Changro; Park, Keyho

doi:10.3846/ijspm.2018.1416

Cited by 4 publications

(4 citation statements)

References 26 publications

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“…Exchange rates Lee and Park (2018) South Korea (2016) By using Integrated Nested Laplace Approximation algorithm, the study revealed that at individual property level, interest rates and physical attributes of a dwelling determine the price-to-rent ratio.…”

Section: Cronin and Mcquinn (2016)mentioning

confidence: 99%

“…From a market perspective, whilst research has examined the P-t-R ratio from a life-cycle model of housing tenure choice or present value perspective, there remain relatively limited insights examining the temporal variations of the P-t-R ratio relative to market determinants and fundamental macroeconomic and financial factors. As outlined in Table 1, a number of studies have sought to analyse the role of mortgage/interest rates (Otto, 2007;Tsai and Peng, 2011;Kim and Lim, 2014;Lee and Park, 2018), money supply (Tsai and Peng, 2011), housing supply (Kishor and Morley, 2015), housing investment (Guo and Huang, 2010;Zhai et al, 2018), inflation (Tsai and Peng, 2011), exchange rates (Bahmani-Oskooee and Wu, 2018) and stock market performance (Okunev et al, 2000) vis-a-vis house prices and the P-t-R ratio. Most of these studies have, however, examined the P-t-R dynamics in the context of macroeconomic fundamentals of just one or two particular aspects of the market.…”

Section: Price-to-rent Ratio and Macroeconomic Factorsmentioning

confidence: 99%

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Causal relationships between the price-to-rent ratio and macroeconomic factors: a UK perspective

McCord

Davis

et al. 2022

JPIF

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PurposeHouse price-to-rent (P-t-R) ratios are among the most widely used measures of housing market conditions. Given the theoretical and apparent bidirectional, causal relationships and imbalances between the housing market, broader economy and financial market determinants, it is important to understand the relationship between macro- and micro-economic characteristics in relation to the P-t-R ratio to enhance the understanding of housing market dynamics. This paper studies the joint dynamics and persistence of house prices and rents and examines the temporal interactions of the P-t-R ratio and economic and financial determinants.Design/methodology/approachThe authors examine the lead–lag relationships between the P-t-R ratios and a spectrum of macroeconomic variables using cointegration and causality methods, initially at the aggregate position and also across housing types within the Northern Ireland housing market to establish whether there are subtle differences in how various housing segments react to changes in economic activity and market fundamentals.FindingsThe findings reveal price switching dynamics and some very distinct long- and short-run relationships between macroeconomic and financial indicators and the P-t-R ratios across the various housing segments. The results exhibit monetary supply, foreign exchange markets and the stock market to be important drivers of the P-t-R ratio, with P-t-R movements seemingly tied, or are in tandem, with the overall economy, particularly with the construction sector.Practical implicationsThe study shows that the P-t-R ratio can be used as an early measure for establishing the effects of macroprudential policy changes and how these may manifest across housing tiers and quality, which can further act as a signal for preventing or at least mitigating future irrational price cyclicity. These insights serve to inform housing and economic policy and macroprudential policy design, principally within lending policy and the effect of regulatory interventions and further enhance the understanding of the P-t-R ratio on housing market structure and dynamics.Originality/valueThis study is the first in the housing literature that examines the causal relationships between the P-t-R ratio and macroeconomic activity at the sub-market level. It investigates whether and how money supply, inflation, foreign exchange markets, general economic productivity and other important macroeconomic factors interact with the pricing of different property types over time.

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Section: Cronin and Mcquinn (2016)mentioning

confidence: 99%

Section: Price-to-rent Ratio and Macroeconomic Factorsmentioning

confidence: 99%

Causal relationships between the price-to-rent ratio and macroeconomic factors: a UK perspective

McCord

Davis

et al. 2022

JPIF

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“…Fluctuation in housing prices touches the nerves of policymakers, ordinary residents, and financial institutions (Dietzel, 2015) and has become an issue of general social concern. Any imbalance or contraction in the housing market can lead to financial instability, which in turn poses a macroeconomic threat (Lee & Park, 2018). Therefore, how to stabilize the housing market has become a top priority for the development of the real estate industry.…”

Section: Introductionmentioning

confidence: 99%

Spatial Effect of Market Sentiment on Housing Price: Evidence From Social Media Data in China

Wang

Liu

2022

International Journal of Strategic Property Management

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Market sentiment has become more easily spread between cities through social media. This study investigates the spatial effect of market sentiment on housing price in a social media environment. In order to extract home-buyer sentiment from social media, we use text sentiment analysis techniques and build a novel housing market sentiment index. A spatial econometric model of housing price volatility is subsequently constructed and the housing market sentiment index is included as an independent variable in the model. Using panel data from 30 large and medium-sized cities in China for 20 quarters from 2016 to 2020, the spatial effect of market sentiment on housing price is empirically analyzed by calculating direct and indirect effects. The results show that market sentiment had a significant positive effect on housing prices in the local and neighboring cities over the research period. However, the impact of market sentiment on housing price was heterogeneous in terms of geographical region; the direct effect was stronger in the eastern region than in the central and western regions, and the indirect effect was significant only in the eastern region. These findings can provide references for government to formulate housing market regulation policies and measures based on market sentiment.

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“…Following the literature on bubble detection [26,27] we focused on the price-to-rent ratios (rather than real price) to control for economic fundamentals. Rent has been shown to be a major indicator of real estate market sustainability [3,12,28]. Comparing six methods for measuring real estate bubbles, Bourassa et al, [27] concluded that the price-to-rent ratio measure is the most reliable method, both ex-post and in real-time, for identifying real estate bubbles.…”

Section: Introductionmentioning

confidence: 99%

An Empirical Investigation on Bubbles Contagion in Scandinavian Real Estate Markets

et al. 2022

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This paper investigates the presence of speculative bubbles in the Scandinavian countries namely Denmark, Finland, Norway, and Sweden over the period from 1980Q1 to 2018Q4 and searches for evidence of bubble migration among those countries. First, we apply the GSADF test developed by Phillips et al. (2015) on quarterly housing price-to-rent ratios to test for exuberance and episodic bubbles. Subsequently, we examine bubble migration between these markets using the non-parametric model with time-varying coefficients (NPM-TVC) developed by Greenaway-McGrevy and Phillips (2016). We find evidence of episodic bubbles in all the Scandinavian real estate markets for the period 1980 to 2018. Our results also indicate that housing bubbles are contagious between these markets during several periods, and the market connection is stronger for geographically neighboring countries.

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Analyzing the Rent-to-Price Ratio for the Housing Market at the Micro-Spatial Scale

Cited by 4 publications

References 26 publications

Causal relationships between the price-to-rent ratio and macroeconomic factors: a UK perspective

Causal relationships between the price-to-rent ratio and macroeconomic factors: a UK perspective

Spatial Effect of Market Sentiment on Housing Price: Evidence From Social Media Data in China

An Empirical Investigation on Bubbles Contagion in Scandinavian Real Estate Markets

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