Case Study:

Relationship between
Rent and
Rahul Shakya
Rahul Yadav
Ravi Kr. Singh
Ques1. The author had identified two
prime reason for the high demand.
Ans:
A wealth of amenities motivates many people
to live in Manhattan.
Agglomeration economies make it profitable
for many type of business
Ques 2.What are the reason and how
they incorporated in price rent
relationship?
Ans:
Rent is determined by the market condition, while
price of housing unit based on the expected stream of
income.
The price rent relationship is basically determined by
the ratio between price and rent. A high ratio represent
the house prices are overvalued, whereas a low ratio
represent the undervalue.
It tally up the monthly cost associate with the
purchase.
Ques 3. When do the price and rent move in
the same direction? What is the total impact
on housing market?
Ans
Price and rent moved in same direction from 1989 to 1999.
From 1989 to 1993 both rent and prices were falling. Economy
begin to pick up in 1993 so did rental market till 1999.
There are some factors which causes to price and rent
universally related:-
1. Lower interest rate.
2. Lower effective property tax rate.
3. Higher federal tax rate.
4. Lower maintenance depreciation rate.
Ques 4. When it is expected that the price of
the houses would rise rapidly making them a
highly risky assets?
Ans:
Ques 5. Which particular period have considered by
the author to study real estate market? Why have
median prices are considered over mean prices for
evaluation?
Ans:
The period between 1989 to 2011 have been
considered and the median price have been taken
as against the mean price because mean price
tends to give a distorted picture of the market
rent as it undistorted the market rent paid by new
tenants.
Ques 6. Why do you think the study have
been motivated?
Ans:
This study has been motivated to ascertain the
degree to which expectation can drive the
estimation of an appropriate P/R ratio.
Also the study help the author to measure the
extent of misalignment between price and rent.