 Testing for Persistence in Housing Price-to-Income and Price-to-Rent Ratios in 16 OECD CountriesChristophe André, Luis Gil-Alana and Rangan Gupta No 201321, Working Papers from University of Pretoria, Department of Economics Abstract: Housing price-to-income and price-to-rent ratios are among the most widely monitored indicators of housing market conditions. While these ratios tend to fluctuate around a constant level or a mild trend over the long term, they also tend to deviate from these benchmarks for protracted periods. Traditional unit root tests often indicate the presence of a unit root. This paper uses the framework of fractional integration to test the persistence of price-to-income and price-to-rent ratios in a sample of 16 OECD countries spanning four decades. The results indicate that the ratios are highly persistent. The possibility that persistence estimates may be affected by structural breaks in the series is also considered, but evidence of such breaks is found only in a very limited number of cases. Policy action may be required if high price-to-income and price-to-rent ratios have adverse social and economic consequences. Policies should be guided by a careful analysis of the factors behind high ratios. Keywords: Housing; Price-to-income ratio; Price-to-rent ratio; Fractional integration; Persistence; Long memory (search for similar items in EconPapers) There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it. Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:pre:wpaper:201321 Access Statistics for this paper More papers in Working Papers from University of Pretoria, Department of Economics Contact information at EDIRC. |
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