Rental Rates under Housing Price Uncertainty: A Real Options Approach
Fan Yu and
Additional contact information
Honglin Wang: Hong Kong Institute for Monetary Research
Fan Yu: Claremont McKenna College
Yinggang Zhou: The Chinese University of Hong Kong and Hong Kong Institute for Monetary Research
No 242013, Working Papers from Hong Kong Institute for Monetary Research
The conventional wisdom that house prices are the present value of future rents ignores the fact that rents are not discretionary as in dividends on stocks. Housing price uncertainty can affect household property investment, which in turn affects rent. By extending the theory of investment under uncertainty, we model the renter's decision to buy a house and the landlord's decision to sell as real options of waiting and examine real options effects on rent. Using unique data from Hong Kong, we find significant a causal effect of house prices on rents and draw important policy implications.
Keywords: Investment Under Uncertainty; Real Options; House Price; Rent; Causal Effect (search for similar items in EconPapers)
Pages: 30 pages
New Economics Papers: this item is included in nep-dem and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
Our link check indicates that this URL is bad, the error code is: 500 Internal Server Error (http://www.hkimr.org/uploads/publication/369/wp-no-24_2013-final-.pdf [301 Moved Permanently]--> http://www.aof.org.hk/research/HKIMR/uploads/publication/369/wp-no-24_2013-final-.pdf [301 Moved Permanently]--> https://www.aof.org.hk/research/HKIMR/uploads/publication/369/wp-no-24_2013-final-.pdf)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:hkm:wpaper:242013
Access Statistics for this paper
More papers in Working Papers from Hong Kong Institute for Monetary Research Contact information at EDIRC.
Bibliographic data for series maintained by HKIMR ().