My hypothesis: the renting is determined by the opportunity cost of selling the house and gaining interests in a bank or some investment company. That is, instead of renting, sell it, put the money in a bank, and gain interest on them.
In other words, the renting prices of real state are determined by only two factors: The price of the house + the interest rates.
However, it has been my observation here where I live, in very few houses (thus lacking some statistical weight), that house renting for commercial entities is around the same as selling the house and gaining interest, but, house renting for a physical person is around half than selling house and gaining interest.
- The hypothesis of renting determined by interest rate is a good one in the context of theoretical microeconomics, or merely simplistic understanding?
- In the real world, is renting primarily determined by interest rate and house price? In other words, is the relationship causal? Or just a correlation? Is there a correlation anyway?
- Are there more mechanisms for determination of the prices of renting a house?
- Why sometimes the renting price can be lower than if gaining on interest? Why would anyone prefer to keep the property of the house, if they could gain more by selling it and gaining interest?