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Efficiency of the Tokyo Housing Market

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  • Takatoshi Ito
  • Keiko Nosse Hirono

Abstract

In analyzing the dynamics of Tokyo housing price, we have compiled annual micro data sets from individual listings in a widely-circulated real estate advertising magazine. A data set compiled from "properties for investment" lists both asking (sales) prices and rents for the same properties. With such data, a price-rent ratio is directly observable and expected capital gains before tax and commissions found to be just less than 90% in ten years. The "repeatedly-listed properties for investment" data set, a subset of the first, contains only those units in the same buildings after a one-year interval. In this data set, price, rent, and ex post capital gains are all observable. They are used to show that ex post returns on housing investment in the last four years were actually rather modest. The data sets for "housing for sale" and "housing for rent" sections were separately used for hedonic regressions, from which we constructed hedonic price and rent indexes. These regressions show the effects of various determinants of housing prices and rents. The time (year) dummy variables in the hedonic regressions give estimates of price and rent increases in the last 11 years in Tokyo. According to these estimates, prices increased 85-90% over the 1981-92 period, while rents increased about 65%. The price-(annual) rent ratio rents appears to have fluctuated between 17 and 32. Finally, the weak-form efficiency of excess returns on housing is rejected. However, the conclusion is tentative considering the short sample.

Suggested Citation

  • Takatoshi Ito & Keiko Nosse Hirono, 1993. "Efficiency of the Tokyo Housing Market," NBER Working Papers 4382, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:4382
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    References listed on IDEAS

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    Cited by:

    1. Maier, Gunther & Herath, Shanaka, 2009. "Real Estate Market Efficiency. A Survey of Literature," SRE-Discussion Papers 402, WU Vienna University of Economics and Business.
    2. Shimizu, Chihiro & Nishimura, Kiyohiko G. & Watanabe, Tsutomu, 2010. "Residential rents and price rigidity: Micro structure and macro consequences," Journal of the Japanese and International Economies, Elsevier, vol. 24(2), pages 282-299, June.
    3. Shigenori Shiratsuka, 1999. "Measurement errors in Japanese Consumer Price Index," Working Paper Series WP-99-2, Federal Reserve Bank of Chicago.
    4. Shiller, Robert J & Weiss, Allan N, 1999. "Home Equity Insurance," The Journal of Real Estate Finance and Economics, Springer, vol. 19(1), pages 21-47, July.
    5. John Krainer & Mark M. Spiegel & Nobuyoshi Yamori, 2010. "Asset Price Persistence and Real Estate Market Illiquidity: Evidence from Japanese Land Values," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 38(2), pages 171-196.
    6. Takatoshi Ito & Tokuo Iwaisako, 1996. "Explaining Asset Bubbles in Japan," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 14(1), pages 143-193, July.
    7. Lee, Yung-Tsung & Wang, Chou-Wen & Huang, Hong-Chih, 2012. "On the valuation of reverse mortgages with regular tenure payments," Insurance: Mathematics and Economics, Elsevier, vol. 51(2), pages 430-441.
    8. Daniele Checchi, 1999. "Inequality in Incomes and Access to Education. A Cross-Country Analysis (1960-90)," Working Papers 21, University of Milano-Bicocca, Department of Economics, revised May 1999.
    9. Maurice J. Roche, 1999. "Irish house prices: will the roof fall in?," Economics, Finance and Accounting Department Working Paper Series n890699, Department of Economics, Finance and Accounting, National University of Ireland - Maynooth.
    10. Chen, Hua & Cox, Samuel H. & Wang, Shaun S., 2010. "Is the Home Equity Conversion Mortgage in the United States sustainable? Evidence from pricing mortgage insurance premiums and non-recourse provisions using the conditional Esscher transform," Insurance: Mathematics and Economics, Elsevier, vol. 46(2), pages 371-384, April.
    11. Kenny, Geoff, 1998. "The Housing Market and the Macroeconomy: Evidence From Ireland," Research Technical Papers 1/RT/98, Central Bank of Ireland.
    12. Takatotshi Ito, 1996. "Japan and the Asian Economies: A 'Miracle' in Transition," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 27(2), pages 205-272.
    13. Ren, Yu & Yuan, Yufei & Zhang, Yang, 2014. "Human capital, household capital and asset returns," Journal of Banking & Finance, Elsevier, vol. 42(C), pages 11-22.

    More about this item

    JEL classification:

    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • R14 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Land Use Patterns

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