[AnthonyMouse]

The proportion is different, because different areas have different borrowing costs, risks, regulatory environments, etc. The proportionality is always there -- if you make it more expensive to buy property than it used to be in the same place, rents will go up. Because the landlord has to pay the mortgage on the building. If you double the mortgage payment, what happens to the rent?

[coldtea]

>The proportion is different, because different areas have different borrowing costs, risks, regulatory environments, etc. The proportionality is always there

That holds for everything. Only if they necessarily also move in the same way does this have any meaning, else it's like saying two points connect to a line.

[AnthonyMouse]

There is an anthill in Brazil. If you pour honey near it, the ants will make more ants. The number of ants in the anthill is proportional to the amount of honey. If you pour pesticide near it, some of the ants will die. The number of ants in the anthill is inversely proportional to the amount of pesticide. If you pour honey and pesticide near the anthill, and the number of ants stays the same, you haven't disproven either of these things, they're both still true, you're just adding the lines together.

If you kill all the bears in Montana, or add a thousand more, the number of ants in Brazil doesn't change. They are not proportional, they're completely unrelated.

[coldtea]

You keep using this word, proportional. I don't think it means what you think it means.

"having a constant ratio to another quantity"

Inversely proportional too is a mathematic relationship with specific meaning (for one the product must be a constant). It doesn't just mean "more pesticide, less ants" (that's a more general statement than inversely proportional).

Perhaps you merely meant correlated with respect to the rent. But even so, in this thread there were so many provisos added, that the relationship is nebulous at least.

[AnthonyMouse]

The relationship we're actually talking about is proportional using your definition. Rent is proportional to housing prices, all else equal.

If all else isn't equal, i.e. you change interest rates or tax rates, then you're changing the constant. But they're still proportional with the new constant. You're only changing the ratio, not the nature of the relationship.

[tomp]

Any 2 numbers are always in proportion, but if the proportion isn't consistent (i.e. changes with location, time, etc) then your argument is just wrong.

https://data.oecd.org/price/housing-prices.htm

Check e.g. historical data (untick "Compare variables") for "Price to rent ratio" for "United Kingdom" from 1990 to 2018.

[jjoonathan]

There are dozens of variables. The argument is that the proportion is constant with respect to a small fluctuation in one of the numbers over time. The fact that the proportion is not constant over the dozens - 1 other variables isn't particularly surprising or pertinent.

[tomp]

No the argument was

> Rents are essentially always proportional to real estate prices.

which is demonstrably not true in any way shape or form.

See e.g. [0] pages 13 and 15 (pages 15 and 17 of pdf) for "median house prices by London borough" and "median monthly private rents by London borough". Westminster has higher rents but lower prices than Kensington. So, yeah, sure, if you include "desirability" in your variables, then you can probably get a regression fit but then the argument "rents are proportional to prices" no longer really makes sense (i.e. you're taking the proportion to be a proxy for desirability and then adding it back to the regression).

[0] https://www.london.gov.uk/sites/default/files/house-prices-i...

[pcr0]

Not always. If interest rates go up, house prices go down but rents go up. The opposite is also true if interest rates go down.

[AnthonyMouse]

That's kind of cheating though, because you're still de facto raising real estate costs (higher interest rate -> higher mortgage payment on the same loan principal).

Changing other components of real estate costs doesn't destroy the proportionality with prices, it only changes the ratio. The same is true of property tax -- raise the tax rate and sale prices decline while rents increase, because rents are also proportional to every other component of overall housing costs, not just the initial principal amount.

It's like saying retail prices aren't proportional to wholesale prices because if you raise commercial rents then the ratio changes. They're still proportional. If you raise rents then retail prices may increase because the retailer has higher costs. If you then raise wholesale prices, the retail prices don't stay the same just because they've already increased, they increase even more.