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House Prices and Rents: Socio-Economic Impacts and Prospects

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Author Info
Arthur Grimes () (Motu Economic and Public Policy Research)
Andrew Aitken () (Motu Economic and Public Policy Research)

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Abstract

We use New Zealand property data at the area unit (suburb) level to examine implied prospects for communities over time, and test whether these derived prospects have explanatory power relating to actual future outcomes. We also use the data to analyse whether disadvantaged communities face particular problems in relation to rental markets. Our results indicate that: capital gains and rental growth expectations historically have appeared reasonable in that they have not been suggestive of asset bubbles or other fad behaviour; derived capital gains and rental growth expectations have explanatory power both over actual future capital gains and actual future rental growth; and lower socio-economic areas face higher rental yields even after controlling for non-socio-economic factors than do high socio-economic areas.

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Publisher Info
Paper provided by Motu Economic and Public Policy Research in its series Working Papers with number 07_01.

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Length: 34 pages
Date of creation: Mar 2007
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Handle: RePEc:mtu:wpaper:07_01

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Web page: http://www.motu.org.nz
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Related research
Keywords: House prices; house rents; rental yields; capital gains; community prospects;

Find related papers by JEL classification:
R11 - Urban, Rural, and Regional Economics - - General Regional Economics - - - Analysis of Growth, Development, and Changes
R21 - Urban, Rural, and Regional Economics - - Household Analysis - - - Housing Demand

This paper has been announced in the following NEP Reports:

References listed on IDEAS
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  1. Karl E. Case & Robert J. Shiller, 1990. "Forecasting Prices and Excess Returns in the Housing Market," NBER Working Papers 3368, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  2. Joshua Gallin, 2004. "The long-run relationship between house prices and rents," Finance and Economics Discussion Series 2004-50, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
  3. Karl E. Case & Robert J. Shiller, 2003. "Is There a Bubble in the Housing Market?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 34(2003-2), pages 299-362. [Downloadable!]
  4. Clark, Todd E., 1995. "Rents and prices of housing across areas of the United States. A cross-section examination of the present value model," Regional Science and Urban Economics, Elsevier, vol. 25(2), pages 237-247, April. [Downloadable!] (restricted)
  5. Steven C. Bourassa & Martin Hoesli & Jian Sun, 2004. "A Simple Alternative House Price Index Method," FAME Research Paper Series rp119, International Center for Financial Asset Management and Engineering. [Downloadable!]
  6. Meese Richard & Wallace Nancy, 1994. "Testing the Present Value Relation for Housing Prices: Should I Leave My House in San Francisco?," Journal of Urban Economics, Elsevier, vol. 35(3), pages 245-266, May. [Downloadable!] (restricted)
  7. Case, Karl E & Shiller, Robert J, 1989. "The Efficiency of the Market for Single-Family Homes," American Economic Review, American Economic Association, vol. 79(1), pages 125-37, March. [Downloadable!] (restricted)
    Other versions:
  8. Juan Ayuso & Fernando Restoy, 2003. "House prices and rents: an equilibrium asset pricing approach," Banco de España Working Papers 0304, Banco de España. [Downloadable!]
  9. Capozza, Dennis R. & Seguin, Paul J., 1996. "Expectations, efficiency, and euphoria in the housing market," Regional Science and Urban Economics, Elsevier, vol. 26(3-4), pages 369-386, June. [Downloadable!] (restricted)
    Other versions:
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