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Hedonic and GMM Estimates of the Relationship between House Prices and Rents in Taiwan

Author

Listed:
  • Chieh-hsuan Wang

    (Department of Economics, National Chengchi University, Taiwan)

  • Chien-ping Chung

    (Department of International Business, Shih Chien University, Taiwan)

  • Jen-Te Hwang

    (Department of Banking and Finance, Kainan University, Taiwan)

Abstract

Empirical results in this study demonstrate that house prices have limited influence over rents in Taiwan. In fact, the impact of house prices on rents is not as apparent as of other factors like the floor (high or low), area, and the interaction of multiple factors such as house attributes like traffic accessibility. This means that the correlation between house prices and rents is not as direct and close as theories or experience would suggest. The findings also imply that a direct causal relationship does not exist between rents and house prices. Apart from reflecting the phenomenon of the price disconnect, the difference between owner-occupied dwellings market and rental market could have also resulted from various factors such as affordability, relevant government policies, and the traditional association of land ownership with wealth. As a result, demographics of house renters have been separated from those of house owners, meaning that households make their tenure choices differently; those who remain in the rental market over the long run are usually the disadvantaged minorities, who can resolve their needs for shelter only through house rentals.

Suggested Citation

  • Chieh-hsuan Wang & Chien-ping Chung & Jen-Te Hwang, 2012. "Hedonic and GMM Estimates of the Relationship between House Prices and Rents in Taiwan," Economics Bulletin, AccessEcon, vol. 32(3), pages 2231-2245.
    • Handle: RePEc:ebl:ecbull:eb-11-00571
    as

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    File URL: http://www.accessecon.com/Pubs/EB/2012/Volume32/EB-12-V32-I3-P216.pdf
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    References listed on IDEAS

    as
    1. Black, Roy T & Wolverton, Marvin L. & Warden, John T. & Pittman, Robert H., 1997. "Manufacturing versus Distribution: Implicit Pricing of Real Property Characteristics by Submarket," The Journal of Real Estate Finance and Economics, Springer, vol. 15(3), pages 271-285, November.
    2. Michael J. Potepan, 1996. "Explaining Intermetropolitan Variation in Housing Prices, Rents and Land Prices," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 24(2), pages 219-245.
    3. Cheung, Yan-leung & Tsang, Shu-ki & Mak, Sui-choi, 1995. "The Causal Relationships between Residential Property Prices and Rentals in Hong Kong: 1982-1991," The Journal of Real Estate Finance and Economics, Springer, vol. 10(1), pages 23-35, January.
    4. Cropper, Maureen L & Deck, Leland B & McConnell, Kenneth E, 1988. "On the Choice of Functional Form for Hedonic Price Functions," The Review of Economics and Statistics, MIT Press, vol. 70(4), pages 668-675, November.
    5. Marvin L. Wolverton & Jimmy Senteza, 2000. "Hedonic Estimates of Regional Constant Quality House Prices," Journal of Real Estate Research, American Real Estate Society, vol. 19(3), pages 235-253.
    6. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 58(2), pages 277-297.
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    Cited by:

    1. Bianca Biagi & Maria Giovanna Brandano & Steven B. Caudill, 2016. "Tourism and house prices in Italy," Tourism Economics, , vol. 22(5), pages 964-978, October.
    2. Bianca Biagi & Maria G. Brandano & Dionysia Lambiri, 2015. "Does Tourism Affect House Prices? Evidence from Italy," Growth and Change, Wiley Blackwell, vol. 46(3), pages 501-528, September.
    3. Mitchell R. Livy, 2020. "Extreme natural events are associated with significant economic losses and expected to increase in frequency and intensity with time. While previous research has primarily investigated singular event ," Economics Bulletin, AccessEcon, vol. 40(1), pages 665-678.
    4. B. Biagi & MG. Brandano & D. Lambiri, 2012. "Does tourism affect house prices? Some evidence from Italy," Working Paper CRENoS 201227, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.

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    More about this item

    Keywords

    rent multiplier; tenure choice; hedonic price function; GMM model;
    All these keywords.

    JEL classification:

    • R2 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis
    • C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables

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