The price–rent ratio inequality in Scottish Cities: fluctuations in discount rates and expected rent growth

Abstract The price to rent ratio can be used identify properties which are either overvalued or undervalued according market fundamentals. Fluctuations in the over time, traced changes expectations of future house growth (expected returns) rental growth. In this paper, we measure impact these latent variables Scotland’s main cities by implementing a state-space model based on present value. estimates show that proportion expected and returns driving differs across Scotland. Glasgow seems driven mostly returns, while drives movements Edinburgh. A geographic dimension is noted as East coast share similar Housing trends Scotland follow Edinburgh experience. Further decompositions an equal combination Dundee Aberdeen.