Michael Blog

• The measurement of rents

1. Ratio of gross rentals, so called PE ratio :  [UK 25 on ave.| Taipei  47 on 2010]
2. Ratio of house price to earnings  :  [UK 4 on ave. | Taipei 17 on 2010]
3. Mortgage payment as % Income  :  [UK 17.5% on ave | Taipei 60%on 2010]

• House price in the Future

1. Ratio of Sales to Unsold stock of properties
2. New mortgage loans for house purchase
3. Mortgage loans for new entrants
4. Sales rate

• Real rents are determined by         
  

  +

  real household income migration type of household dissolution rates(離婚率)

  _

  new construction demolitions(拆房)

• The user cost is determined by
  

  +

  mortgage rate depreciation expenditure rate property tax transaction costs credit market constraints

  _

  housing dubsidies expected capital gains

• Elasticity of
• • housing supply -1.7~-2.4
  • Income 2~3
  • mortgage rate -2~-4
  • Real wealth 0.4
• Dmand of private rented secor

• Net immigration
• Reduced public housing stock
• High postgraduate education (Attract oversea students)
• Credit constrained and slower earnings growth interacting with high house price growth.
• Work place movement

       
Sub-National Analysis

• Ripple Effect : The tendency for reginal prices diverge in the short-run but move toghter in the long-run because of (1) spatial arbitrage (2) equity transformation (3) migration
• Influence of migration
• • Age
  • With school-aged children
  • Professional occupations
  • Relative housing costs
• Equity transfer migration : The reason is existing homeowners migrate to consume more in a cheaper region.
• Spatial arbitrage :
• • Arbitrage to eliminate differences in regional house returns.
  • House prices fall in suburban LARGER THAN those in urban, with time lagged behind.