Abstract
This paper focuses on different fundamental models that derive the market fundamental housing price as a sum of the expected present value of rent or permanent housing income. By applying the State-Space Model and using the housing price in Taipei from 1973Q1 to 2008Q1;this paper tests whether there was a housing price bubble. The findings point out that the bubble existed in Taipei from 1988 to 1990;and the bubble accounted for 47% of the housing price from the housing income model (54% from the rent model). Moreover; Taipei's housing prices rose consistently in 2008 and the bubble price estimated by the income model was close to 38% of the housing price (27% by the rent model). Accordingly; both the price-income ratios and price-rent ratios are useful indicators reflecting the rationality of the housing price.
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