Pricing Factors in Real Estate Markets: A Simple Preference Based Approach

Su Han Chan (), Ko Wang () and Jing Yang ()
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Su Han Chan: Department of Finance, College of Business and Economics, California State University ?Fullerton, http://business.fullerton.edu/finance/schan
Jing Yang: Department of Finance, College of Business and Economics, California State University ?Fullerton, http://www.fullerton.edu

International Real Estate Review, 2003, vol. 6, issue 1, 102-120

Abstract: Conventional wisdom tells us that the price level of properties should be supported by the rent they receive. This paper examines the pricing factors of properties by analyzing how individuals allocate their income to housing consumption and other goods, which in turn become the rent (or implicit rent) to support property values. Our model’s results can explain several puzzling observations in property markets, including why the variance of property appreciation rates is much higher than that of income growth rates in the same area.

Keywords: Preference-based model; pricing factors; property appreciation; property markets (search for similar items in EconPapers)
JEL-codes: L85 (search for similar items in EconPapers)
Date: 2003
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