I've been trying to find sources that mention this, and have tried to find graphs of data so I can compare myself, but I haven't been able to. Do real-estate sale prices correlate positively, negatively, or not at all with apartment rental prices? A more nuanced answer than that is also appreciated.
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2 Answers
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In theory there should be a direct positive correlation (especially in countries where house prices are a part of the index which is used to define rental rates), but in reality there is a lot of variation in the results for this question depending on the country, possible effects of different laws, the business cycle, whether new housing is being built or not, etc.
For Italy, Manganelli, Morano and Tajan (2014) in "House prices and rents. The Italian experience" study response functions and conclude:
2) Rents depend on real-estate prices, the short-term interest rate and the differences between actual and expected GDP with a one year delayed reaction.
On the other hand, Ambrose, Eichholtz and Lindenthal (2013) in House Prices and Fundamentals: 355 years of evidence, Journal of Money, Credit and Banking find that when housing prices stray from equilibrium growth, rental rates do not react the same way even if it takes decades for the prices to return to steady growth.
For a recent study on U.S. data (model built to match trends from 1960-2013), I'd check Gelain and Lansing (2014): House prices, expectations, and time-varying fundamentals, Journal of Empirical Finance
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$\begingroup$ Very informative! Pretty interesting that one study concluded there was a 1 year delayed reaction. I would expect that rental rates are saner than housing prices, which I think is what you're saying the Ambrose et al paper concludes, since there's no real ability to speculate in rental prices. $\endgroup$– B TCommented Nov 5, 2015 at 8:05
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A apartment is usually a set price for all the same units as for real estate pricing they usually base what the monthly payment will be from how much was put down on the house and how many years you choose to pay it off. Not saying that there can't be similar in pricing which depends on where you are living such as city and state.Indaina Reia provide a new real estate guidlines.
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1$\begingroup$ I proof read your answer for you: Each unit of an apartment usually costs a set price. As for real estate pricing, the monthly payment is usually based on the amount of money put down on the mortgage and the length of the mortgage. I'm not saying that they can't be similar in monthly price, though, since it depends on what city, state, etc you're living in. Indiana REIA provides new real estate guidelines, that ...? . $\endgroup$– B TCommented Apr 3, 2019 at 5:59