Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/174315 
Year of Publication: 
2017
Series/Report no.: 
ESRI Working Paper No. 582
Publisher: 
The Economic and Social Research Institute (ESRI), Dublin
Abstract: 
An understanding of the house price to rent ratio and its determinants is important in assessing housing market developments and tenure choice therein. While the ratio is most usually explained by the user cost of capital, the influence of credit conditions on it has been added to econometric assessments in recent years. Using a new cross-country panel, we estimate the impact of variations in credit conditions on the house price to rent ratio between 1994 and 2015 on both a panel and country-by-country basis. This period was one of substantial cross-country house price movements as developments in standard explanatory variables, such as income levels, interest rates and demographics, were accompanied by major changes in credit markets. In line with other recent studies, our results establish the relevance of credit conditions to the house price to rent ratio at both panel and country levels. Moreover, the evidence points to credit conditions dominating the user cost of capital over the sample period, emphasising the need to include credit analysis when evaluating housing market developments.
Subjects: 
House Prices
Rents
Credit
JEL: 
G12
R21
R30
Document Type: 
Working Paper

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