House Prices and Rents: Micro Evidence from a Matched Dataset in Central London by Philippe Bracke
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Transcript of House Prices and Rents: Micro Evidence from a Matched Dataset in Central London by Philippe Bracke
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House Prices and RentsMicro Evidence from a Matched Dataset in Central London
Philippe Bracke
London School of Economics
PyData 2014, London (Feb 23)
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About me
I Studied economics
I Wanted to become a theoreticalmacroeconomist
I PhD: discovered the joys of data analysisI Python (and R, Stata)
Current research focus Housing markets
Twitter @PhilippeBracke
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Today’s TalkRoadmap
1. Introduction
2. Data
3. Matching procedure
4. Some findings
5. More matching
6. Summary and way forward
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(http://www.telegraph.co.uk/property/propertypicturegalleries/9054056/The-best-Matt-cartoons-on-property.html)
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Focus of this research
Price
Rentor
Rent
Price(Rental yield)
They matter hugely for...
Households Buy vs rent
Landlords Return on investment
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Aggregate ratio between house prices and rents:important indicator of housing market conditions
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Micro-level differences in rental yields: equally important
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Why does RentPrice change?
(over time and over space)
Rent = User cost ·Price (“no-arbitrage”)
Rent
Price= rf + δ - Eg + m
I Interest rate
I Risk
I Expected growth
I Maintenance
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Data
1. House prices
2. (Private-sector) rents
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Land Registry Price Paid data
All registered property sales in England and Wales, 1995–2013
→ 18.5m records, freely available!
I full address
I price paid
I date of transfer
I property type: Detached, Semi, Terraced or Flat/Maisonette
I new build or not
I freehold or leasehold
http://www.landregistry.gov.uk/market-trend-data/public-data/
price-paid-data
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Transaction prices in London, 2006–2012
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The problem: Data on private rents
I Rental data are much less available than house price data
A gap exists in official private rental statistics with noofficial private rental index currently available
The National Statistician’s Review of Official Housing MarketStatistics, September 2012
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The problem: Data on private rents (cont’d)
I The Office for National Statistics (ONS) released in 2013 anexperimental quarterly index of the private rental market
I The index is based on individual rental data from theValuation Office Agency (VOA), who deploys rental officers tocollect the price paid for privately rented properties
I This data is not publicly available
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John D Wood & Co.Rental Dataset
I Real estate agency with 14 London offices and 6 offices in theSouth-East of England
I Focus on upper market: Central/South-West London andcountryside
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John D Wood & Co. (cont’d)Rental Dataset
I new contracts, noroll-overs
I internal records +exchange of data withother agencies
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Weekly rent, Agency DatasetCentral-Western London, 2006–2012
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Matching procedure
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Matching issuesAddress format
Land Registry
Clean and easy:
postcode W2 3DB
paon 5
saon FLAT K
street WESTBOURNE CRESCENT
Ambiguous:postcode UB4 8FJ
paon MARSH COURT, 561
saon 4
street UXBRIDGE ROAD
Agency data
Clean and easy:
hsename Flat K
hseno 5
address1 Westbourne Crescent
postcode W2
Ambiguous:hsename
hseno 2
address1 Rupert House
address2 Nevern Square
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Matched datasetConstruction
I try as much as possible to harmonise the two datasetsI all variables in upper case letters as in LRI rename “hseno” as “paon”, and “hsname” as “saon”
I join together all transactions sharing the same “street”,“paon” and “saon”
Rule 1 for each sale, keep the closest rent
Rule 2 for each rent, keep the closest sale
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Matched datasetDistance between sale and rental contract
050
010
0015
0020
00M
atch
es
−2000 −1000 0 1000 2000Days
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Descriptive stats
Matched Units Complete DatasetLand Registry & Rentals Rentals
Observations 1,922 48,341
Median rent 595 525Median price 650,000Median gross rent-price ratio 0.05
Property type (%)Lower-ground apartment 0.07 0.08Ground-floor apartment 0.12 0.13First-floor apartment 0.17 0.18Second-floor apartment 0.17 0.15Third-floor apartment 0.11 0.11Fourth-floor+ apartment 0.12 0.16Multi-level apartment 0.04 0.06House 0.20 0.11
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Descriptive stats (cont’d)
Matched Units Complete DatasetLand Registry & Rentals Rentals
Bedrooms (%)1-bedroom property 0.33 0.362-bedroom property 0.41 0.413-bedroom property 0.16 0.154-bedroom+ property 0.10 0.07
Apartment block 0.16 0.31
Median floor area (sqft) 797 860
Furnished/unfurnished (%)Unfurnished 0.25 0.24Partly furnished 0.34 0.27Furnished 0.41 0.49
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Some findings
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Matched datasetRent-price ratio over time
.02
.04
.06
.08
01jul2006 01jan2008 01jul2009 01jan2011 01jul2012
R/P ratio 10−year UK Government Bond Yield
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Matched datasetRent-price ratio vs. property value
0.0
2.0
4.0
6.0
8.1
0 1000 2000 3000 4000Price (in £1,000)
Rent−price ratios vs Prices
0.0
2.0
4.0
6.0
8.1
0 500 1000 1500 2000 2500Rent (in £ per week)
Rent−price ratios vs Rents
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Matched datasetRent-price ratio vs. property type
.02
.04
.06
.08
.1
0 1000 2000 3000 4000Price (in £1,000)
Rent−price ratios vs Prices (Apartm.)
0.0
2.0
4.0
6.0
8.1
0 1000 2000 3000 4000Price (in £1,000)
Rent−price ratios vs Prices (Houses)
.02
.04
.06
.08
.1
0 1000 2000 3000 4000Floor area (sqft)
Rent−price ratios vs Floor areas
NW1
NW3
NW8
SW1
SW10
SW11
SW3
SW5
SW6 SW7
SW8
W1W10
W11W14W2
W8
W9
.046
.048
.05
.052
.054
.056
400 600 800 1000 1200Average Price (in £1,000)
Rent−price ratios vs Prices (by Postcode)
Patterns confirmed by multivariate regression:
Rent
Price= α + Type β1 + Size β2 + Location β3 + Date β4 + ε
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Depreciation/maintenance costs and rent-price ratiosRent
Price= rf + δ − g + m
House = land + structure
I More expensive locations: higher land share ⇒ RentPrice ↓
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More MatchingRepeat sales, repeat rentals
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How to measure future appreciation and risk?Rent
Price= rf + δ − Eg + m
I Need to find future sales and/or rentals of the same property
→ Match within-Land Registry or within-Agency dataI easier
Repeat sales: not frequent
Repeat rentals: many
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The effect of future appreciation and risk
Sales
Rentals
Matched Dataset Matched + Repeat Rentals Dataset
1,922 properties 859 properties
Max gap = 180 days
Average gap = 85 days
Max gap = 2,360 days
Average gap = 578 days
Regression results
I One-standard deviation higher future rent appreciation⇒ Rent
Price ↓ by 1.6%
I Ambiguous results on rent volatility (one measure of risk)
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Summary and way forward
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Summary
I Novel dataset on prices and rents in Central LondonI Measure rent-price ratios directly for matched properties
I Find lower rent-price ratios for expensive properties
→ Effect of size→ Effect of location
and other effects
I Consistent with economic theory
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Next steps
I The Land Registry is a recent open data resource with hugepotential
I Can be matched with many other datasetsI private datasetsI public housing-related websites
I Let’s collaborate!I Github, philippebracke
Thank you!