"Hot" and "cold" market cycles on the real estate market are characterized by co-movements between rents and liquidity. Substantial deviations from these phases signal either overrented or underrented expectations by landlords or drastic changes in tenants' housing demand. Since a general market liquidity indicator is missing, this paper develops hedonic rental and liquidity indices to explore their co-movements along the real estate market cycle. Based on a Granger test the paper determines a lead-lag relation between rent and liquidity indices in order to explain the contemporaneous rent-liquidity causality. By making use of more than half million observations, the paper further explores the response of the indices in presence of exogenous variables from 2013 to 2017.
Cajias, Marcelo, and Anna Heller. Understanding the rent-liquidity co-movements in the real estate markets: Large sample evidence from German micro data In 25th Annual European Real Estate Society Conference. ERES: Conference. Reading, UK, 2018.
Section: Real Estate Economics