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

Authors: Su Han Chan, Ko Wang, Jing Yang

Start Page:102
End Page: 120
Volume: 6
Issue Number: 1
Year: 2003
Publication: International Real Estate Review

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.

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