Market Efficiency and Rationality in Property Investment

Abstract:     
This paper applies the present value model to investigate property market efficiency in the UK. The existence of "rational bubbles" in UK property market is ruled out at conventional statistical significance levels, though UK property market appears not efficient. In addition, there are variations among the office, retail and industrial property markets. The rejection of the present value model implies a price discovery mechanism may exist for property investment.

Keywords: Present value model, bubble, market efficiency

JEL Classification: R30

Accepted Paper Series