Equilibrium between interest payments and income in the housing market

Vries, Paul de; Boelhouwer, Peter

doi:10.1007/s10901-008-9131-z

Cited by 13 publications

(11 citation statements)

References 22 publications

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“…To compare with the results generated from IIR, we used the same quarterly data to re-estimate the work by de Vries & Boelhouwer (2009) who considered the IIR as the equilibrium measurement of house prices and used error correction method to estimate the house prices. Figure 5 compares the long-run house prices in logarithm generated from IIR-based estimation and that of the flexible relationship with respect to the actual prices.…”

Section: Comparison With Iir-based Resultsmentioning

confidence: 99%

“…They first introduced the interest-to-income ratio (IIR) to reflect the long-run equilibrium, which was subsequently extended to incorporate short-term effects. The IIR is a reasonable proxy of the long-run equilibrium in light of the favorable tax policy that inspires households to purchase houses, the borrowing limits imposed by financial institutions, and the high loan-to-value ratio observed in this market (de Vries & Boelhouwer, 2009).…”

Section: Linkage To An Existing Dutch Model: Interest/income Ratiomentioning

confidence: 99%

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House prices and long-term equilibrium in the regulated market of the Netherlands

Haan

Boelhouwer

2017

Housing Studies

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a otB-Research for the Built environment, delft university of technology, delft, the netherlands; b statistics netherlands, the Hague, the netherlands ABSTRACT This paper establishes a simple affordability model that implicitly incorporates the major Dutch market features to elucidate long-run house prices under a regulatory environment. The results reveal a long-run relationship for house prices under strict regulations. The association among house prices, income, interest rates, and inflation is verified using an aggregated dataset. In the long-run, incomes and interest rates function as the two prime forces driving price dynamics, whereas the role of inflation is limited.

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Section: Comparison With Iir-based Resultsmentioning

confidence: 99%

Section: Linkage To An Existing Dutch Model: Interest/income Ratiomentioning

confidence: 99%

House prices and long-term equilibrium in the regulated market of the Netherlands

Haan

Boelhouwer

2017

Housing Studies

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“…In addition, under certain market restrictions and irrational trader behaviors, a hike in housing prices may persist despite prices being considered to be overvalued. Moreover, de Vries and Boelhouwer (2009) report that the long-term and short-term changes in housing prices are inconsistent, with short-term fluctuations being caused by market inefficiencies, whereas long-term fluctuations are influenced by fundamental factors such as income.…”

Section: Introductionmentioning

confidence: 99%

Do Higher House Prices Indicate Higher Safety? Price Volatility Risk in Major Cities in Taiwan

Chu¹,

Tsai

2020

International Journal of Strategic Property Management

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This study investigates the housing market in Taiwan, an emerging market with relatively severe housing price inflation. Using data from the first quarter of 1991 to the second quarter of 2017 for four cities in Taiwan, this study compares the risk transmission and sources of their housing prices. The results reveal that Taipei−Taiwan’s main financial hub−has the highest house prices among the four cities but maintains the lowest risk. Thus, in terms of price volatility risk, Taipei has the safest housing market among the studied cities. Other studies have discussed the potential housing price bubbles in regions with high housing prices but have been unable to explain the continual overheating of the housing markets. The findings of this study reveal that despite having the highest housing prices and the greatest potential bubble, the Taipei housing market has the lowest fluctuation risk, making it the safest market in terms of housing investment. The results of this study imply that Taiwan’s economic development is excessively concentrated in Taipei, causing people to bear low returns and high risk when purchasing real estate in other areas, in turn increasing the continual imbalance between regional housing markets.

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“…Theory based on the permanent income hypothesis suggests that aggregate consumption for housing in any particular period is a stable function of the average income over the current cycle (Abraham and Hendershott 1996;Malpezzi 1999;Meen 2002;Chen et al 2007;De Vries and Boelhouwer 2009). Over a long period the economic growth will certainly push up income and house price and increasing demand for better quality.…”

Section: Introductionmentioning

confidence: 99%

“…Evidence indicates that both short-run fundamentals and long-run fundamentals have an impact on houses prices. In the short term, significant upward or downward movements ('shocks') appear, due to speculative or psychological effects (for example, see Reichert 1990; Levin and Wright 1997;Meen 1998;Hort 1998;De Vries and Boelhouwer 2009). The term 'bubble builder' is often used in this context and reflects upon the feeling that house prices are to high in relation with the house quality.…”

Section: Introductionmentioning

confidence: 99%

House Price, House Quality and Economic Growth

Vries

Boelhouwer²

2010

Proceedings of the 17th Annual European Real Estate Society Conference - Milan, Italy

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Abstract:The literature on housing markets suggest that periods of economic growth are characterised by a demand for better housing quality and increasing prices. The basic principles of the theory are that the short-run price fluctuations occur due to market imperfection, while over the long term, causality with such fundamentals as income will recover. Affordability of the higher quality then becomes a problem in the subsequent period of economic stagnation. This article seeks to identify the mechanism in which quality and affordability are weighed against each other, showing that the price-quality relationship changes with the economic growth. We do this against the background of the Dutch housing market. Our analysis shows that in a high-growth economy households search for better quality of property and are prepared to pay for it. In a stagnant economy the demand for quality takes second place to the demand for affordable homes. It also appears that appreciation of quality varies in particular between the low-growth phase and the medium-growth phase. The price-quality relationship barely varies between the medium-growth and high-growth phases.

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Equilibrium between interest payments and income in the housing market

Cited by 13 publications

References 22 publications

House prices and long-term equilibrium in the regulated market of the Netherlands

House prices and long-term equilibrium in the regulated market of the Netherlands

Do Higher House Prices Indicate Higher Safety? Price Volatility Risk in Major Cities in Taiwan

House Price, House Quality and Economic Growth

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