Abstract
Purpose – Downward movements in house prices can exacerbate bank crises if mark‐to‐market methods of asset valuation are used by lenders to assess their current balance sheet exposure. There is an imperative to find methods of house price index calculation that reflect equilibrium prices rather than temporary undershoots. The purpose of this paper is to propose a new methodology in order to evaluate whether market house prices are different from their fundamental asset prices.Design/methodology/approach – This paper proposes a method for house asset valuation that incorporates expected house price appreciation as an endogenous variable. This avoids the necessity to make conjectures about expected future house price appreciation when applying Poterba's user‐cost method of house asset valuation. The methodological extension to Poterba's user‐cost method of house asset valuation endogenises expected house price appreciation as the no‐arbitrage expected price appreciation consistent with the term structure of...
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callMore From: International Journal of Housing Markets and Analysis
Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
