2009•Economic Research GuideRequires access
Origin, Use and Limitation of House Price-income Ratio
Gang Xia
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Abstract
House price-income ratio is currently used as an indictor for measuring housing affordability of urban household in China. Most papers treat the interval 4~6 of house price-income ratio as international standards ,and some papers investigate the problems of house price-income ratio, but these papers are based on such an assumption that the housing affordability can be measured reasonably with house price-income ratio.This paper investigates the origin, use and limitation of house price-income ratio, and finds that the interval 4~6 is not an international standard of house price-income ratio in developing countries; house price-income ratio is an city-level or macro-level indicator, not an micro-level one, and can not measure housing affordability of household; house priceincome ratio can not capture the effect of income growth and non-housing expenditures on housing affordability, i.e, can not measure reasonably housing affordability.