Housing Price, Permanent Income, Tenure Choice and Housing Demand in Tokyo

Abstract

This paper reports the results on estimation of housing demand for ownership households and tenants in Tokyo using household level data for 1993. The paper estimates a two step model. In the first step a hedonic price function is estimated which is used to construct price index for Tokyo. In the second step, a simultaneous model of tenure choice and housing demand is estimated. The results indicate that the demand for rental housing is inelastic with respect to permanent income and price at 0.26 and -0.33. The demand for owner houses are also inelastic with income as well as prices at 0.37 and -0.37. However, income elasticity is higher for owner houses than it is for rental houses. Other variables that are important in determining housing demand are household size and household type variables.