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Pricing Factors in Real Estate Markets: A Simple Preference Based Approach

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Abstract

Conventional wisdom tells us that the price level of properties should be supported by the rent they receive. This paper examines the pricing factors of properties by analyzing how individuals allocate their income to housing consumption and other goods, which in turn become the rent (or implicit rent) to support property values. Our model’s results can explain several puzzling observations in property markets, including why the variance of property appreciation rates is much higher than that of income growth rates in the same area.

Suggested Citation

  • Su Han Chan & Ko Wang & Jing Yang, 2003. "Pricing Factors in Real Estate Markets: A Simple Preference Based Approach," International Real Estate Review, Global Social Science Institute, vol. 6(1), pages 102-120.
    • Handle: RePEc:ire:issued:v:06:n:01:2003:p:102-120
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    References listed on IDEAS

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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Preference-based model; pricing factors; property appreciation; property markets;
    All these keywords.

    JEL classification:

    • L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services

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