House Prices and Rents: Socio-Economic Impacts and Prospects

Motu Working Paper No. 07-01

34 Pages Posted: 27 Mar 2007

See all articles by Arthur Grimes

Arthur Grimes

Motu Economic and Public Policy Research Trust

Andrew Aitken

Motu Economic and Public Policy Research

Date Written: March 2007

Abstract

We use New Zealand property data at the area unit (suburb) level to examine implied prospects for communities over time, and test whether these derived prospects have explanatory power relating to actual future outcomes. We also use the data to analyse whether disadvantaged communities face particular problems in relation to rental markets. Our results indicate that: capital gains and rental growth expectations historically have appeared reasonable in that they have not been suggestive of asset bubbles or other fad behaviour; derived capital gains and rental growth expectations have explanatory power both over actual future capital gains and actual future rental growth; and lower socio-economic areas face higher rental yields even after controlling for non-socio-economic factors than do high socio-economic areas.

Keywords: House prices, house rents, rental yields, capital gains, community prospects

JEL Classification: R11, R21

Suggested Citation

Grimes, Arthur and Aitken, Andrew, House Prices and Rents: Socio-Economic Impacts and Prospects (March 2007). Motu Working Paper No. 07-01, Available at SSRN: https://ssrn.com/abstract=975413 or http://dx.doi.org/10.2139/ssrn.975413

Arthur Grimes (Contact Author)

Motu Economic and Public Policy Research Trust ( email )

19 Milne Terrace
Island Bay
Wellington 6002
New Zealand

Andrew Aitken

Motu Economic and Public Policy Research ( email )

Level 1, 93 Cuba Street
P.O. Box 24390
Wellington, 6142
New Zealand

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