House Rent - Price Ratios: An International Comparison

Peter Chinloy, Man Cho and Inho Song

Journal of Real Estate Research, 2018, vol. 40, issue 3, 347-374

Abstract: Tenants have liquidity constraints that limit volatility in nominal rents, leading houses to become bond-like. The incidence of shocks on rental yields is near zero. For 1980–2014 in Germany and Japan, houses are bond-like, with tenants bearing less than 5% of asset-price shocks. In the United States and United Kingdom, houses are inflation-linked bonds earning real yields of 4%, with tenants bearing 20% of shocks. In Korea, a capital market leads tenants to bear all price shocks. Only there is the rental yield perfectly negatively correlated with capital gains, a requirement for the user cost of housing.

Date: 2018
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DOI: 10.1080/10835547.2018.12091504

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