Evaluating the value of "it's mine"

Economist Calls Housing Boom 'Biggest Bubble in History'.

The price of a home should reflect the future benefits of ownership, in the form of rental income for an investor or rent saved by an owner-occupier. When the price-to-rent ratio is high, property is overvalued.

The writer dismisses "ownership value" -- the somewhat real and somewhat imagined advantages -- which people receive when they have title. He seems to suggest that most people are fools for paying for non-economic benefits. Odd thing for an economist to say.

Comments

[Luca]

I would guess that the utility value of 'possession'/title would be fairly stable in time (to some extent it would depend on the volatility of rents, the enforceability of rental contracts and other microeconomic variables like that). If rental yield falls fluctuates rapidly, it would be safe to assume that it reflects momentary supply/demand flows rather than a structural change in the utility of holding title.

An economist