Hedonic and GMM estimates of the relationship between house prices and rents in Taiwan

Abstract

Empirical results in this study demonstrate that house prices have limited influence over rents in Taiwan, In fact, the impact of house prices on rents is not as apparent as of other factors like the floor (high or low), area, and the interaction of multiple factors such as house attributes like traffic accessibility. This means that the correlation between house prices and rents is not as direct and close as theories or experience would suggest. The findings also imply that a direct causal relationship does not exist between rents and house prices. Apart from reflecting the phenomenon of the price disconnect, the difference between owner-occupied dwellings market and rental market could have also resulted from various factors such as affordability. relevant government policies, and the traditional association of land ownership with wealth. As a result, demographics of house renters have been separated from those of house owners. meaning that households make their tenure choices differently: those who remain in the rental market over the long run are usually the disadvantaged minorities, who can resolve their needs for shelter only through house rentals.