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Relationship between Price and Rent in the Real Estate Market and Stability Analysis: A Theoretical Approach

Author

Listed:
  • DAS, ISHITA

    (Wipro Technologies)

  • GUPTA, RAJNARAYAN

    (Presidency University)

Abstract

In recent times, volatility in the housing market has become an issue of great macroeconomic concern. Various efforts have been made to detect existence of bubbles and estimate their severity. The present study attempts to find out the possible economic reasons behind housing market instability and to understand the role of a regulatory authority in arresting the same. The study finds that there are possibilities of a housing market being stable in the sense that it attains stability by itself. A regulator’s role becomes important when a market does not follow a self-corrective model to reach equilibrium by itself. If, however, the regulator can once successfully place the market on the stable path, it by its own reaches equilibrium and does not move further until some exogenous shock disturbs the system.

Suggested Citation

  • Das, Ishita & Gupta, Rajnarayan, 2012. "Relationship between Price and Rent in the Real Estate Market and Stability Analysis: A Theoretical Approach," Indian Economic Review, Department of Economics, Delhi School of Economics, vol. 47(2), pages 247-264.
    • Handle: RePEc:dse:indecr:0055
    as

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    More about this item

    Keywords

    House Price; Rent; Buy-to-Reside; Buy-to-Invest; Saddle Path; Stability Analysis.;
    All these keywords.

    JEL classification:

    • 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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