Hedonic Price-Rent Ratios, User Cost, and Departures from Equilibrium in the Housing Market
AbstractDepartures of the housing market from equilibrium can be detected by comparing the actual price-rent ratio with the user cost of owner occupying. Empirical implementation of this idea, however, is problematic for two reasons. First, the price-rent ratio needs to be quality adjusted. Second, the expected capital gain – an important input into the user cost formula – is not directly observable. Using a large data set for Sydney-Australia, we show how these problems can be resolved using hedonic methods. Otherwise the user cost approach can generate highly misleading results.
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Bibliographic InfoPaper provided by University of Graz, Department of Economics in its series Graz Economics Papers with number 2012-08.
Date of creation: Dec 2012
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- Robert Hill & Iqbal A. Syed, 2012. "Hedonic Price-Rent Ratios, User Cost, and Departures from Equilibrium in the Housing Market," Discussion Papers 2012-45, School of Economics, The University of New South Wales.
- C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
- E01 - Macroeconomics and Monetary Economics - - General - - - Measurement and Data on National Income and Product Accounts and Wealth; Environmental Accounts
- E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
- R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets
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