House price to income ratio and fundamentals: Evidence on long‐horizon forecastability

Chen, Nan‐Kuang; Cheng, Han-Liang

doi:10.1111/1468-0106.12231

Cited by 19 publications

(11 citation statements)

References 58 publications

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“…As mentioned earlier, the analysis of housing market bubbles is based both on the prices themselves (see, e.g., Kibunyi et al, 2017 ; Chen & Chiang, 2020 ; Coskun et al, 2020 ) but also on relational indicators, in particular the price-to-rent ratio (see, e.g., Mikhed & Zemcík, 2009 ; Yiu et al, 2013 ; Greenaway-McGrevy & Phillips, 2016 ; Zhang et al, 2017 ; Li et al, 2019 ; Clark & Lomax, 2020 ) or a price-to-income ratio (see, e.g., Fraser et al, 2008 ; Chen & Cheng, 2017 ; McMillan & Speight, 2010 ) in the absence of rental data. The use of the latter indicators is preferable because both housing prices and rents can exhibit explosive behaviour over the same period, making it difficult to conclude on the existence of a bubble when based solely on prices.…”

Section: Introductionmentioning

confidence: 99%

Identification of house price bubbles using robust methodology: evidence from Polish provincial capitals

Tomal

2021

J Hous and the Built Environ

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This article aims to check whether there has been a price bubble in the Polish major housing markets in recent years. To accomplish this goal, the log price-to-rent ratios in Polish provincial cities were analysed. In order to avoid incorrect conclusions, the log price-to-rent ratio using the instrumental variable estimation and ordinary least squares methods was decomposed into two components: fundamental and non-fundamental. The latter was then examined using the Phillips, Shi, and Yu procedure to detect explosive and downward movements. The results of the study showed that, in general, over 2011, actual log price-to-rent ratios in the analysed cities were below their fundamental values, i.e., a negative price bubble existed. However, more or less since the beginning of 2013, the surveyed markets have seen an increasing level of the non-fundamental component of the index under study, and its particularly explosive movements are visible in the first quarters of 2014. Finally, this analysis indicated future research directions and study implications for Polish policy-makers, housing investors, and households.

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Section: Introductionmentioning

confidence: 99%

Identification of house price bubbles using robust methodology: evidence from Polish provincial capitals

Tomal

2021

J Hous and the Built Environ

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“…With reference to housing prices, a myriad of papers has focused on spatial differentiation [3,4], house price determinants [5,6], house price-to-rent ratio [7,8], house price-to-income ratio [9,10], and the relationship between house prices and rents [11]. When compared to research on housing prices, there has been relatively less research on housing rent.…”

Section: Introductionmentioning

confidence: 99%

The Impact of Micro-Level Influencing Factors on Home Value: A Housing Price-Rent Comparison

Cui

Shen

et al. 2018

Sustainability

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The housing sales market in China has flourished and gained considerable interest, while the housing rental market has lagged behind and been ignored over the past two decades. With the acceleration of urbanization, the housing rental demand is rising rapidly. Exploring and comparing the influencing factors on housing sale prices and rental prices has significance for sustainable urban planning and management. Using house purchase transaction and rent transaction data in 2017, as well as the average housing price and rent data in 2016 in Beijing, China, this paper compares the spatial distribution and it employs the hedonic price model and quantile regression model to quantify the average and distributional effects of micro-level influencing factors on housing prices and housing rents. Results show that housing prices and housing rents both have a decentralized distribution with multiple centers, but rents of residential communities with high housing prices may not necessarily be high. Both homeowners and renters prefer properties with good structural, locational, and neighborhood characteristics, as well as a good school attendance zone, whereas they still differ in terms of preferences. Homeowners prefer a higher-quality living environment. Renters are more concerned with proximity to an employment center and public transit convenience. Moreover, the price premium of school quality for homeowners exceeds the premium for renters. Higher-priced homeowners or renters differ in the preferences from lower-priced homeowners or renters. Higher-priced homeowners and higher-priced renters are more willing to live in property with a larger number of bedrooms, proximity to a major employment center, park, or school, as well as a location in a school attendance zone with higher school quality.

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“…Thus, our data on real GDP (in millions of US dollars) and wage index are collected from OECD.stat, while the housing price indices are obtained from the Bank of International Settlements. 19 Altogether, there are 15 countries in our study, including Australia, Canada, Denmark, Finland, France, Germany, Italy, Japan, Netherlands, New Zealand, Norway, Spain, Sweden, UK, and the US. 20 Our data is in quarterly frequency and covers the period from 1997Q1 -2018Q4.…”

Section: Empirical Evidencementioning

confidence: 99%

“…This means that the contract wage is set equal to the expected value of the Walrasian wage ( −1   *  ), i.e. (19),…”

Section: A Proofmentioning

confidence: 99%

The dynamics of the house price‐to‐income ratio: Theory and evidence

Leung

Tang

2021

Contemporary Economic Policy

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The house price-to-income ratio (PIR) is widely used as an affordability indicator. This paper complements the cross-sectionally focused literature by proposing a tractable model for the PIR dynamics. Our model predicts that the PIR is very persistent and is correlated to the lagged aggregate output. Cross-country analysis confirms this prediction and provides evidence for a long-term, positive and significant relationship between PIR and aggregate production. Our results hint at the construction of an early warning system for housing market mispricing. Our tractable formulation of a stochastic money growth rule may carry independent research interest.

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House price to income ratio and fundamentals: Evidence on long‐horizon forecastability

Cited by 19 publications

References 58 publications

Identification of house price bubbles using robust methodology: evidence from Polish provincial capitals

Identification of house price bubbles using robust methodology: evidence from Polish provincial capitals

The Impact of Micro-Level Influencing Factors on Home Value: A Housing Price-Rent Comparison

The dynamics of the house price‐to‐income ratio: Theory and evidence

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