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Housing Supply, Demand and Price: Construction Cost, Rental Price and House Price Indices
Author(s) -
Tsai IChun
Publication year - 2012
Publication title -
asian economic journal
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.345
H-Index - 28
eISSN - 1467-8381
pISSN - 1351-3958
DOI - 10.1111/j.1467-8381.2012.02088.x
Subject(s) - economics , renting , price index , index (typography) , supply and demand , supply side , demand side , microeconomics , house price , consumer price index (south africa) , econometrics , macroeconomics , monetary policy , world wide web , political science , computer science , law
Housing prices are subject to the impacts of supply as well as demand. While supply is affected by construction costs, demand is determined by the renting/buying considerations of the public. As a result, the construction cost index ( CCI ) on the supply side and the rental price index ( RPI ) on the demand side should be closely related to the house price index ( HPI ). The present study adopts three price indices of the Taiwan housing market, the CCI , the RPI and the HPI , and examines long‐term and short‐term correlations among the three indices. Empirical results indicate that the relationships among three indices are nonlinear. More interestingly, this article finds that the HPI stimulates changes in the CCI and the RPI , although construction costs and rent are viewed as fundamentals in the existing literature. This phenomenon is rather obvious when deviations of the latter two indices from the HPI are greater. The corrective behavior of the HPI is more notable under these circumstances.