This paper studies on the relation between the sales market and the rental market in Seoul condominium market via causality test, cointegration test, and estimation of housing sales pricing model. Theoretically, there is an arbitrage equilibrium condi...
This paper studies on the relation between the sales market and the rental market in Seoul condominium market via causality test, cointegration test, and estimation of housing sales pricing model. Theoretically, there is an arbitrage equilibrium condition between the housing sales market and the rental market, the sales price is explained by the rental prices.
But I find no empirical evidences on the causality and long term equilibrium relation between the sales market and rental market. Therefore these results might indicate the housing sales market and rental market is independently separate market. Also there are the infrequent trading effects on the two market, even thought the duration and strength of the effects are different.
So, the housing sales pricing model is estimated with combined the theory and empirical evidences. The independent variables are current, first, second difference rental price and first, second difference sales price.