The price–rent ratio inequality in Scottish Cities: fluctuations in discount rates and expected rent growth

The price to rent ratio can be used to identify properties which are either overvalued or undervalued according to market fundamentals. Fluctuations in the price to rent ratio over time, can be traced to either changes in expectations of future house price growth (expected returns) or rental growth. In this paper, we measure the impact of these latent variables in Scotland’s main cities by implementing a state-space model based on the present value. The model estimates show that the proportion of expected rent growth and expected returns driving the price to rent ratio differs across Scotland. Glasgow seems to be driven mostly by expected returns, while rent growth drives price movements in Edinburgh. A geographic dimension is noted as cities on the East coast share similar expected returns and expected rent growth. Housing market trends in Scotland mostly follow the Edinburgh experience. Further decompositions show that house price changes are driven by an equal combination of expected rent growth and expected returns in Dundee and Aberdeen.

Modelling housing market fundamentals and the response to economic and political events: empirical evidence from Kuwait

Purpose The purpose of this paper is to examine the sensitivity of the Kuwait housing market to major local and regional geo-political and economic events. Design/methodology/approach This paper examines the market dynamics of the housing market in Kuwait. Kuwait provides an interesting market to consider owing to its position as a major oil producer, its sensitivity to geo-political events and its unusual demographic characteristics. Findings The error-correction model highlights that market is relatively volatile, with evidence of mean-reverting behaviour. Only when the data is smoothed are their more consistent findings with respect to underlying fundamentals. This paper also examines the response of the market to seven regional and local events. Of particular interest is that the one event that results in a consistent significant response is domestic legislation directly concerned with housing. This has a far greater impact than local or regional geo-political events. Originality/value Very few papers have considered how economic and political shocks directly impact housing markets using an event study approach. Given its geographic location and also its economic dependence on oil, Kuwait is an interesting market to consider.

How Does COVID-19 Affect House Prices? A Cross-City Analysis

Using individual level transaction data and a revised difference-in-differences method with nonparametric smoothing, we study the effect of COVID-19 on house prices. The analyses are performed on the areas of Houston, Santa Clara, Honolulu, Irvine, and Des Moines in the US, which vary in the economic features and the implementation of stay home orders. The results show that only Honolulu experienced noticeable house price declines from the outbreak, suggesting that a heavier reliance on service industries might be correlated with higher vulnerabilities. Santa Clara and Irvine lead the house price increase rates, followed by Des Moines and Houston, indicating that stronger housing market fundamentals, better amenities and less dependence on service industries are associated with more positive house price effects.

Drivers of Sovereign Bond Yields in India

This study analyzed the behavior of the ten-year nominal sovereign bond yield in India with respect to a host of factors, especially for a decade when economic growth alters considerably with time. The vector autoregression methodology (VAR) was applied to the monthly data of economic and financial variables from January 2012 to March 2020. The findings suggested that long-run sovereign bond yield behavior was primarily driven by domestic fundamentals, including money market fundamentals. A rise in the 91-day treasury bill lagged the value of the bond yield, and inflation exert significant upward pressure on the ten year domestic sovereign bond yields. International factors such as exchange rate and crude oil price exert significant but mild influence. Another finding was affirmed that short-term domestic bond yield movements significantly determined long-run domestic bond yields. From an overall policy perspective, it becomes important to maintain domestic economic stability to manage fiscal and debt sustainability.

Aspects of the European natural gas market in the dynamic context of global energy resources

The purpose of this article is to illustrate the structural changes of the European natural gas market through the lenses of the dynamic economic relations between European Union and its biggest energy supplier, Russia. The economic and political aspects are two essential dimensions to understand the measures taken by the EU in order to assure their security of supplies and at the same time to observe the Russian capacities to maximize their profits driven from its vast energy resources. Otherwise Russia is experiencing some difficulties in increasing its export shares on the European gas market, owing to several geopolitical challenges. Nevertheless, the relation between these two blocks could be defined as one of interdependence and symbiosis due to the evolution of the energy trade agreements. We attempt to identify those different market fundamentals and economic processes that have led to the mismatch between the crescent liberalisation in the EU gas sector and the Russian approach to energy market governance.

Private-equity commercial real estate, timberland, and farmland: market integration and information transition dynamics

Using data from the National Council of Real Estate Investment Fiduciaries (NCREIF), we examine market integration of commercial real estate and timberland–farmland assets via the Fama–MacBeth two-step approach under the intertemporal capital asset pricing framework. In addition, we study the information transition dynamics between those markets via the vector error correction model (VECM). We find evidence of market segregation and one-way information flow from the timberland–farmland market to the commercial real estate market. We conclude that commercial real estate and timberland–farmland assets are driven by different market fundamentals and that lagged timberland–farmland returns can help predict current commercial real estate returns. The only exception is during market downturns when commercial real estate and timberland–farmland markets are somewhat integrated and driven by some factors that are not specified in this study.