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Chung, Keunsuk
School of Business Administration
Research Interests
  • International Macroeconomics
  • Economic Growth
  • International Capital Flows

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The Changing Relationship between UK Home Prices and Rents

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Title
The Changing Relationship between UK Home Prices and Rents
Other Titles
영국 주택시장내 매매가-월세 비율 분석
Author
Chung, KeunsukKim, Jan R.
Issue Date
2014-12
Publisher
한국외국어대학교 영미연구소
Citation
영미연구, v.32, pp.309 - 330
Abstract
The present value models of house prices predict that house prices andrents are related via a stable price-to-rents ratio, as house prices areequal to the present discounted values of future rents. The prolongeddivergence of the UK house prices from rents since the mid-1990s hasput into question the stability of the price-rents relation. In this paper, wereexamine the changing relationship between house price and rents using aMarkov-switching error correction model, and we find two distinctregimes in the price-rents relation. In one regime, which is identifiedmainly in the pre-1988 era, the long-run equilibrium relationshipcorresponds to the prediction of the present value models, i.e., the stableprice-to-rents ratio. The other regime, prevailing since 1988 forward,also involves a stationary price-rents relation. As such, this regime is notcharacterized with speculative bubbles. However, the long-run relation inthis regime is difficult to explain by the present value models, and theidentified regime period exhibits a long swing in the price-rents ratio.
URI
https://scholarworks.unist.ac.kr/handle/201301/11666
ISSN
1229-6961
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