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House Rent - Price Ratios : An International Comparison

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  • Peter Chinloy
  • Man Cho
  • Inho Song

Abstract

Tenants have liquidity constraints that limit volatility in nominal rents, leading houses to become bond-like. The incidence of shocks on rental yields is near zero. For 1980–2014 in Germany and Japan, houses are bond-like, with tenants bearing less than 5% of asset-price shocks. In the United States and United Kingdom, houses are inflation-linked bonds earning real yields of 4%, with tenants bearing 20% of shocks. In Korea, a capital market leads tenants to bear all price shocks. Only there is the rental yield perfectly negatively correlated with capital gains, a requirement for the user cost of housing.

Suggested Citation

  • Peter Chinloy & Man Cho & Inho Song, 2018. "House Rent - Price Ratios : An International Comparison," Journal of Real Estate Research, Taylor & Francis Journals, vol. 40(3), pages 347-374, July.
    • Handle: RePEc:taf:rjerxx:v:40:y:2018:i:3:p:347-374
    DOI: 10.1080/10835547.2018.12091504
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