Asset bubble is a popular topic in recent years, and there are many literatures to study if there are housing bubble exist in the housing market or what are the determinate factors to affect the housing market. Hence the housing price are composed of fundamental value and bubble, the definition of fundamental will affect the results of housing bubble. However, few paper to analysis the relationship between fundamental and housing bubble. Therefore, in this study we investigate the influence of different fundamental on housing bubble.

We used the rent, household income and macroeconomic variables to build the fundamental model, respectively. Through the consistent State-Space model to measure the housing bubble from the first quarter of 1981 to the second quarter of 2012Q2 in Taipei City. Our result shows that when housing price boom, these three fundamental model have the consistent performance, in other word, the bubble size almost the same. However, when housing market recession, the trend of bubble prices are significant differences. Where, the bubble price calculated from rent fundamental almost are still positive, the bubble price calculated from household income fundamental are significant negative, and the bubble price calculated from macroeconomic variables fundamental are stable fluctuation. We think that the fundamental is composed of macroeconomic variable is in line with the current situation.