Analysis of house price dynamics using the price-to-rent ratio: evidence from the Oslo housing market
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- Master of Science 
Housing prices in Oslo have risen significantly in recent decades, approaching historic levels. Specifically, in the last ten years, house prices in Oslo have experienced a remarkable appreciation of 90%, surpassing the 47% increase in rental prices. This paper aims to examine the long-run dynamics of house prices in Oslo by investigating the relationship between the price-to-rent ratio and relevant macroeconomic variables. A Johansen cointegration test and Vector error-correction model are applied to determine these relationships. The results provide evidence indicating the existence of a cointegrated relationship between the macroeconomic variables and the price-to-rent ratio. The estimated VECM suggests that real interest rate is the predominant driver, followed by population and disposable income. In the short-run, the price-to-rent ratio adjusts toward equilibrium with an adjustment speed of 28,52% per quarter. A shock to the debt-to-income ratio has the most significant effect on the price-to-rent ratio, while the ratio itself is the primary driver in determining its variability.
Masteroppgave(MSc) in Master of Science in Business, Finance - Handelshøyskolen BI, 2023 Masteroppgave(MSc) in Master of Science in Business, Sustainable Finance - Handelshøyskolen BI, 2023