House Prices and Rents: Microevidence from a Matched Data Set in Central London

Bracke, Philippe

doi:10.1111/1540-6229.12062

Cited by 73 publications

(63 citation statements)

References 37 publications

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“…At the other end of the spectrum, the discount rate on very short leases can be compared to the average rent‐price ratio in the area, given some degree of substitutability between renting for a few years and buying a short lease. Bracke () measures rent‐price ratios in 2006–12 in the same PCL area and finds a median rent‐price ratio of 5%, consistent with discount rates of 4–7% seen for very short leases in the 2004–13 sample.…”

Section: Resultsmentioning

confidence: 78%

The Time Value of Housing: Historical Evidence on Discount Rates

Bracke

Pinchbeck

Wyatt

2017

The Economic Journal

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Most London housing transactions involve trading long leases of varying lengths. We exploit this to estimate the time value of housing – the relationship between the price of a property and the term of ownership – over a 100 years and derive implied discount rates. For our empirical analysis, we compile a unique historical data set (1987–92) to abstract from the right to extend leases currently enjoyed by tenants. Across a variety of specifications and samples, we find that leasehold prices are consistent with a time declining schedule and low long‐term discount rates in housing markets.

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Section: Resultsmentioning

confidence: 78%

The Time Value of Housing: Historical Evidence on Discount Rates

Bracke

Pinchbeck

Wyatt

2017

The Economic Journal

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“…The biased estimates imply that homeownership rates are increasing in the predicted price of a home even though the predicted rent-to-price ratio declines in the price of the home. This is a common finding: Verbrugge (2008); Heston and Nakamura (2009);Verbrugge and Poole (2010);Bracke (2013); Epple et al (2013) all find that rent-to-price ratios decline with prices while, similarly, Landvoigt et al (Forthcoming) estimates that housing service flows rise less than one-for-one with property prices in the cross-section. 20 The relationships shown in Figure 12 and in these studies are puzzling from a certain angle and are a challenge for models which attempt to explain the distribution of household homeownership choices: why do so many households choose to buy expensive properties when seemingly equivalent rental properties are relatively cheap?…”

Section: Bias In Imputed Rents And/or Pricesmentioning

confidence: 87%

“…However, the rescaling does play an important role in the analysis of user costs, yields, and contracting costs in Section 5.4. For these parts of the analysis, we estimate ω 33 by fitting the predicted rental sector yields from the model to data on rental sector yields in Bracke (2015). We discuss this further in Section 5.4.…”

Section: Modelmentioning

confidence: 99%

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The housing stock, housing prices, and user costs: the roles of location, structure and unobserved quality

Halket¹,

Nesheim²,

Oswald³

2015

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Using the English Housing Survey, we estimate a supply side selection model of the allocation of properties to the owner-occupied and rental sectors. We find that location, structure and unobserved quality are important for understanding housing prices, rents and selection. Structural characteristics and unobserved quality are important for selection. Location is not. Accounting for selection is important for estimates of rent-to-price ratios and can explain some puzzling correlations between rent-to-price ratios and homeownership rates. We interpret this as strong evidence in favor of contracting frictions in the rental market likely related to housing maintenance.

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“…This differential is broadly consistent with what others have found. Both Bracke (2013), for a matched sample of London homes, and Hill and Syed (2012), for Sydney, find lower yields for houses than apartments. Bracke (2013) finds that the rental yield for houses is around half a percent lower than for apartments.…”

Section: Insert Figures 4 5 and 6 Herementioning

confidence: 93%

Residential Real Estate, Risk, Return and Home Characteristics: Evidence from Sydney 2002-14

Melser¹,

Rottke²,

Krautz³

et al. 2017

24th Annual European Real Estate Society Conference

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Abstract:Residential real estate is a key component of household wealth. While we have some insight into the aggregate returns of this asset class-thanks to real estate price indexes-we have little understanding of the characteristics of investment in individual properties. This paper outlines and applies a methodology for estimating and examining the variation in risk and return for unique homes. We use large data sets of home prices and rents for Sydney, Australia, from 2002-14, to estimate flexible spline hedonic models which incorporate spatial and characteristics smoothing. Using these models we estimate total returns-the sum of capital gains and rental yield-for a large sample of properties for each time period. This enables use to consider the risk and return of investment in individual parcels of residential real estate and explore the benefits of diversification. As a reference point, we contrast housing with investment in equities. We find that there is dispersion in returns and their volatility-though significantly less than shares-and that this is tied to certain home characteristics. However, when we investigate the benefits of holding a diversified portfolio of homes over a single home we find they are small compared with the corresponding case for equities.

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House Prices and Rents: Microevidence from a Matched Data Set in Central London

Cited by 73 publications

References 37 publications

The Time Value of Housing: Historical Evidence on Discount Rates

The Time Value of Housing: Historical Evidence on Discount Rates

The housing stock, housing prices, and user costs: the roles of location, structure and unobserved quality

Residential Real Estate, Risk, Return and Home Characteristics: Evidence from Sydney 2002-14

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