Estimating Quantile-Specific Rental Yields for Residential Housing in Sydney

Sofie R. Waltl
Luxembourg Institute of Socio-Economic Research

The paper was awarded the 2019 Yu Chen Memorial Prize sponsored by the University of Graz Economics Department.


Rental yields are widely used by investors, central bankers, researchers, and policy makers to assess and detect disorders in housing markets. This paper proposes a framework to measure rental yields across the distribution, time and space thus providing a comprehensive picture of housing markets. The two-step procedure based on hedonic quantile regression and propensity score matching is designed to fundamentally control for differences in house characteristics. The methodology is applied to micro-data on house transactions and asking rents in Sydney, Australia, between 2004 and 2014. The paper finds large temporal and spatial variation in rental yields, decreasing yields when moving from the low end of the distribution to the top end, and systematically larger yields when restricting the analysis to houses bought-to-let.

JEL.: R31; C21; C43

Keywords: Rental yield; Price-to-rent ratios; Hedonic models; Quantile regression; Housing markets

This project has benefited from funding from the Austrian National Bank (Jubiläums-fondsprojekt 14,947) and the JungforscherInnenfonds sponsored by the council of the University of Graz.


Estimating Quantile-Specific Rental Yields for Residential Housing in Sydney, Regional Science and Urban Economics 68, 2018, 204 – 225.

Presentations:  [OeNB, Vienna, October 2016] [Lincoln Institute of Land Policy, Cambridge (MA), May 2016]