Long-Term Relationship between the Gap in User-Rental Costs and Housing Prices

Abstract

we conducted this study to confirm the long-term relationship between the home owner’s user cost() and renter’s rental cost() of the same house as well as confirming the long-term relationship between the value of ( ) and housing price(). To do this, after building reasonable formulas to calculate the values of  and  varied by time t, we analyzed the values of  and  by region. In the end, we presented the future forecasted values of ( ) and . Related to the long-term relationship between  and , it is expected that the demand for home buying would increase when the situation of < lasted. On the contrary, the demand for home buying would decrease when the situation of > lasted. Meanwhile, the potential home buyer could prefer renting to buying the same home when the growth rate of house price is lower than average growth rate. This period is expected to be highly related to the period when the situation of > lasted, and in our analysis, we could confirm this close relationship. It is expected that the analyzed results of the long-term relationship between ( ) and  as well as the forecasting method we used in our analysis could be used as a meaningful indicator to estimate the future direction of housing market environment by region in advance.