Fundamental Real Estate Prices: An Empirical Estimation with International Data

Fundamental Real Estate Prices: An Empirical Estimation with International Data We propose two alternative models to estimate fundamental prices on real estate markets. The first model is based on a no-arbitrage condition between renting and buying. The second model interprets the period costs as the result of market equilibrium between housing demand and supply. We estimate both models for the USA, the UK, Japan, Switzerland, and the Netherlands. We find that observed prices deviate substantially and for long periods from their estimated fundamental values. However, we find some evidence that, in the long-run, actual prices tend to return to their fundamental values progressively. This result is due to both impulse–response functions and forecast analyses. In particular, we find that using the fundamental price significantly increases the accuracy of out-of-sample long-term forecasts of the price. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Journal of Real Estate Finance and Economics Springer Journals

Fundamental Real Estate Prices: An Empirical Estimation with International Data

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Publisher
Springer US
Copyright
Copyright © 2007 by Springer Science+Business Media, LLC
Subject
Economics; Regional/Spatial Science; Financial Services
ISSN
0895-5638
eISSN
1573-045X
D.O.I.
10.1007/s11146-007-9097-8
Publisher site
See Article on Publisher Site

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