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What Accounts for the Differences in Rent-Price Ratio and Turnover Rate? A Search-and-Matching Approach

Daisy J. Huang (), Charles Leung () and Chung-Yi Tse ()
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Daisy J. Huang: Southwestern University of Finance and Economics
Chung-Yi Tse: University of Hong Kong

The Journal of Real Estate Finance and Economics, 2018, vol. 57, issue 3, No 5, 475 pages

Abstract: Abstract We build an on-the-house search model and show that two frequently used metrics for the housing market, the rent-to-price ratio (or rental yield) and the turnover rate, are jointly determined in equilibrium. We, therefore, estimate a simultaneous equations system on matched sale-rental pairs, as a housing unit cannot be owner-occupied and renter-occupied at the same time. We confirm that a higher turnover rate is associated with a lower rental yield. We also identify a form of “dichotomy” in empirical determinants of rental yields and turnover rates at the estate level: the demographic structure and past returns affect an estate’s turnover rate, while popularity, human capital, mortgage burdens, and long-run rent growth determine its rental yield. The robustness of our results is established through a series of tests. Our popularity index for 130 estates in Hong Kong, estate rankings, and the brand premia of major real estate developers may carry independent interests.

Keywords: Housing rental yield; Turnover rate; Bootstrap; Leave-one-out cross-validation; Matching estimator; 3-stage least squares (search for similar items in EconPapers)
Date: 2018
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Working Paper: What account for the differences in rent-price ratio and turnover rate? A search-and-matching approach (2017) Downloads
Working Paper: What account for the differences in rent-price ratio and turnover rate? A search-and-matching approach (2017) Downloads
Working Paper: What account for the differences in rent-price ratio and turnover rate? A search-and-matching approach Downloads
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DOI: 10.1007/s11146-017-9647-7

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