Fundamental Analysis of Residential Investment
  • 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.
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