House prices and associated risks are rising globally

2019 ◽  
Keyword(s):  
Real Estate ◽  
House Prices ◽  
Housing Markets ◽  
Global Property ◽  
Financial Flows ◽  
Content Type ◽  
Real Estate Markets ◽  
Emerging Nations ◽  
Property Prices ◽  
The World

Subject Global property prices. Significance House prices have surged in the last five years, mostly in high-income economies where demand has rebounded after falling in the aftermath of the 2008-09 recession. Adjusted for inflation, house prices rose steadily across the world between 2013 and 2018, raising concerns about the downside risks associated with overvaluations. Impacts Housing markets are difficult to tune; lenient policies aimed at supporting immediate activity will increase longer-run risks. Real estate markets are becoming more synchronised, and more exposed to common downside risks if global financial flows drop. Cities and financial centres in advanced and emerging nations are most exposed as they enjoy more flows of volatile capital.

scholarly journals A dynamic model for housing price spillovers with an evidence from the US and the UK markets

2018 ◽  
Vol 2 (1) ◽  
pp. 70-81 ◽  
Author(s):  
Alper Ozun ◽  
Hasan Murat Ertugrul ◽  
Yener Coskun
Keyword(s):  
New York ◽  
Real Estate ◽  
House Prices ◽  
Housing Prices ◽  
House Price ◽  
Housing Markets ◽  
Content Type ◽  
Real Estate Markets ◽  
Country Level ◽  
The Us

Purpose The purpose of this paper is to introduce an empirical model for house price spillovers between real estate markets. The model is presented by using data from the US-UK and London-New York housing markets over a period of 1975Q1-2016Q1 by employing both static and dynamic methodologies. Design/methodology/approach The research analyzes long-run static and dynamic spillover elasticity coefficients by employing three methods, namely, autoregressive distributed lag, the fully modified ordinary least square and dynamic ordinary least squares estimator under a Kalman filter approach. The empirical method also investigates dynamic correlation between the house prices by employing the dynamic control correlation method. Findings The paper shows how a dynamic spillover pricing analysis can be applied between real estate markets. On the empirical side, the results show that country-level causality in housing prices is running from the USA to UK, whereas city-level causality is running from London to New York. The model outcomes suggest that real estate portfolios involving US and UK assets require a dynamic risk management approach. Research limitations/implications One of the findings is that the dynamic conditional correlation between the US and the UK housing prices is broken during the crisis period. The paper does not discuss the reasons for that break, which requires further empirical tests by applying Markov switching regime shifts. The timing of the causality between the house prices is not empirically tested. It can be examined empirically by applying methods such as wavelets. Practical implications The authors observed a unidirectional causality from London to New York house prices, which is opposite to the aggregate country-level causality direction. This supports London’s specific power in the real estate markets. London has a leading role in the global urban economies residential housing markets and the behavior of its housing prices has a statistically significant causality impact on the house prices of New York City. Social implications The house price co-integration observed in this research at both country and city levels should be interpreted as a continuity of real estate and financial integration in practice. Originality/value The paper is the first research which applies a dynamic spillover analysis to examine the causality between housing prices in real estate markets. It also provides a long-term empirical evidence for a dynamic causal relationship for the global housing markets.

scholarly journals An Attempt to Identify Social – Economic Factors in the Levels Of Property Prices in Chosen Cities in Poland

2018 ◽  
Vol 26 (3) ◽  
pp. 93-104
Author(s):  
Sebastian Kokot
Keyword(s):  
Real Estate ◽  
House Prices ◽  
Real Estate Market ◽  
Special Importance ◽  
Real Estate Markets ◽  
The Real Estate ◽  
Property Prices ◽  
The Social ◽  
Average Unit ◽  
Potential Factors

Abstract Property prices vary on different local real estate markets. Even considering only the largest cities, great disproportions between average unit prices can easily be observed. This problem involves all segments of the real estate market, yet, because of the social & economic importance of housing properties, it takes on special importance on the apartment market. In Warsaw - the capital of Poland and the largest Polish city - prices exceed PLN 10,000 per 1m2 in the best locations and the average price at the end of 2016 in the entire city came to over PLN 7,500 per 1m2. At the sme time, however, average prices in other agglomerations, such as Łódź or Katowice, were equal to approx. PLN 3,500 per 1m2. It is only natural to ask what factors, especially social & economic, contribute to such considerable differences in house prices. This article addresses a group of potential factors underlying the prices of apartments, which have been studied statistically in correlation with average unit prices of apartments in chosen cities.

Real estate development in the city of Athens during the financial crisis

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Maria Nikitidou ◽  
Fragiskos Archontakis ◽  
Athanasios Tagkalakis
Keyword(s):  
Financial Crisis ◽  
Real Estate ◽  
Structural Characteristics ◽  
House Prices ◽  
Real Estate Market ◽  
Structural Factors ◽  
Data Set ◽  
Content Type ◽  
Capital Financing ◽  
The City

Purpose This study aims to determine how the prices of residential properties in the Greek real estate sector are affected by their structural characteristics and by the prevailing economic factors during recession. Design/methodology/approach Based on 13,835 valuation reports for the city of Athens, covering a period of 11 years (2006–2016), this study develops a series of econometric models, taking into account both structural characteristics of the property market and the macroeconomic relevant variables. Finally, the city of Athens is divided into sub-regions and the different effects of the structural factors in each area are investigated via spatial analysis confirming the validity of the baseline model. Findings Findings show that the size, age, level, parking and storage space can explain the property price movements. Moreover, the authors find evidence that it is primarily house demand variables (e.g. the annual average wage, the unemployment rate, the user cost of capital, financing constraints and expectations about the future course of the house market) that affect house prices in a statistically significant manner and with the correct sign. Finally, using a difference-in-differences approach, this study finds that an increase in house demand (on account of net migration) led to higher house prices in smaller and older than in larger and younger apartments in areas with high concentration of immigrants. Originality/value This study uses a novel data set to help entities, individuals and policy-makers to understand how the recent economic and financial crisis has affected the real estate market in Athens.

Real estate risk, yield modelling and market sentiment: the impact on pricing in European office markets

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Tony McGough ◽  
Jim Berry
Keyword(s):  
Real Estate ◽  
International Capital ◽  
Content Type ◽  
International Capital Markets ◽  
Real Estate Markets ◽  
Market Sentiment ◽  
Office Markets ◽  
Risk Pricing ◽  
Changes In Risk ◽  
The Impact

PurposeThe financial and economic turmoil that resulted from the Global Financial Crisis (GFC), included a marked increase in the volatility in real estate markets. Property asset prices were impacted by the real economy and market sentiment, particularly concerning the determination of risk. In an economic downturn, the perception of investment risk becomes increasingly important relative to overall total returns, and thus impacts on yields and performance of assets. In a recovery phase, and particularly within an environment of historically low government bonds, risk and return compete for importance. The aim of this paper is to assess the interrelationships and impacts on pricing between real estate risk, yield modelling outcomes and market sentiment in selective European city office markets.Design/methodology/approachThis paper specifically considers the modelling of commercial property pricing in relation to the appetite for risk in the financial markets. The paper expands on previous work by determining a specific measure of risk pricing in relationship to changing financial market sentiment. The methodology underpinning the research specifically examines the scope for using national and international risk pricing within specific real estate markets in Europe.FindingsThis paper addresses whether there is a difference between the impact of risk on the pricing of real estate in international versus regional cities in Europe. The analysis, therefore, determines which city centre office markets in Europe have been most impacted by globalisation including the magnitude on real estate prices and market volatility. The outcome of the paper provides important insights into how changes in risk preferences in the international capital markets have driven and continues to drive yield movements under different market conditions.Research limitations/implicationsThe paper considers the driving forces which have led to the volatile movements of yields, emanating from the GFC.Practical implicationsThis paper considers the property market effects on pricing of commercial real estate and the drivers in selected European cities.Originality/valueThe outcome of the paper provides important insights into how changes in risk preferences in the international capital markets have driven and continue to drive the yield movements in different real estate markets in Europe.

Foreign investment in Australian residential properties

2019 ◽  
Vol 12 (2) ◽  
pp. 166-180 ◽  
Author(s):  
Hassan F. Gholipour ◽  
Hooi Hooi Lean ◽  
Reza Tajaddini ◽  
Anh Khoi Pham
Keyword(s):  
Real Estate ◽  
Foreign Investment ◽  
House Prices ◽  
Real Estate Market ◽  
Housing Development ◽  
Housing Construction ◽  
Annual Data ◽  
Content Type ◽  
Residential Properties ◽  
The Impact

Purpose The purpose of this study is to examine the impact that foreign investment in existing houses and new housing development has on residential house prices and the growth of the housing construction sector. Design/methodology/approach The analysis is based on a panel cointegration method, estimated using annual data for all Australian states and territories spanning the period of 1990-2013. Findings The results indicate that increases in foreign investment in existing houses do not significantly lead to increases in house prices. On the other hand, a 10 per cent increase in foreign investment for housing development decreases house prices by 1.95 per cent. We also find that foreign real estate investments have a positive impact on housing construction activities in the long run. Originality/value Existing studies used aggregate foreign real estate investment in their analyses. As foreign investment in existing houses and foreign investment for housing development have different impacts on the demand and supply sides of housing market, it is crucial that the analysis of the effects of foreign investment in residential properties on real estate market is conducted for each type differently.

scholarly journals NIMBYs for the rich and YIMBYs for the poor: analyzing the property price effects of infill development

2020 ◽  
Vol 13 (1) ◽  
pp. 55-81 ◽  
Author(s):  
Fredrik Brunes ◽  
Cecilia Hermansson ◽  
Han-Suck Song ◽  
Mats Wilhelmsson
Keyword(s):  
Construction Projects ◽  
House Prices ◽  
Spillover Effect ◽  
Control Area ◽  
Hedonic Model ◽  
Control Group ◽  
Content Type ◽  
Infill Development ◽  
Property Prices ◽  
New Construction

Purpose This paper aims to analyze how nearby property prices are affected by new construction projects in Stockholm. If there is an impact on property prices, the authors endeavor to investigate whether the effects vary among different areas within the municipality, for different groups of inhabitants and for different types of housing (i.e. public versus private housing). Design/methodology/approach The authors use a difference-in-difference specification in a hedonic model, and the sample consists of more than 90,000 observations over the period 2005-2013. Findings The results are robust and indicate that house prices in nearby areas increase following the completion of infill development. The results also indicate that infill development has a positive spillover effect on nearby dwelling prices only in areas with lower incomes, more public housing units and more inhabitants born abroad. Originality/value It provides an analysis on how nearby property prices are affected by new construction projects by creating a restricted control area, so as to make the treatment group and the control group more homogeneous. Thus, it mitigates any potential problems with spatial dependency, which can cause biased standard errors.

Return and co-movement of major public real estate markets during global financial crisis

2017 ◽  
Vol 35 (5) ◽  
pp. 489-508 ◽  
Author(s):  
Kim Hiang Liow ◽  
Shao Yue Angela
Keyword(s):  
Financial Crisis ◽  
Real Estate ◽  
Global Financial Crisis ◽  
Content Type ◽  
Real Estate Markets ◽  
The Public ◽  
Movement Dynamics ◽  
The Usa ◽  
Short Run ◽  
Practical Implications

Purpose The purpose of this paper is to investigate the volatility spectral of five major public real estate markets, namely, the USA, the UK, Japan (JP), Hong Kong (HK), and Singapore (SG), during the pre- and post-global financial crisis (GFC) periods. Design/methodology/approach First, univariate spectral analysis is concerned with discovering price cycles for the respective real estate markets. Second, bivariate cross-spectral analysis seeks to uncover whether any two real estate price series share common cycles with regard to their relative magnitudes and lead-lag patterns of the cyclical variations. Finally, to test the contagion effects, the authors estimate the exact percentage change in co-spectral density (cyclical covariance) due to high frequencies (short run) after the GFC. Findings The authors find that whilst none of the public real estate markets examined are spared from the crisis, the three Asian markets were less severely affected by the GFC and were accompanied by a reversal in volatility increase three years post-global financial crisis. Additionally, the public real estate markets studied have become more cyclically linked in recent years. This is particularly true at longer frequencies. Finally, these increased cyclical co-movements measure the outcomes of contagion and indicate fairly strong contagious effects between the public real estate markets examined due to the crisis. Research limitations/implications The implication of this research is that benefits to investors from international real estate diversification may not be as great during the present time compared to previous periods because national public real estate markets have become more correlated. Nevertheless, the findings do not imply the complete absence of diversification benefits. This is because although cyclical correlations increase in the short run, many of the correlation values are still between low and moderate range, indicating that some diversification benefits may still be realized. Practical implications Given the significant market share and the highest levels of securitization in Asia-Pacific markets including JP, HK/China, and SG, this cyclical research including major public real estate markets has practical implications for ongoing international real estate investment strategies, particularly for the USA/UK and Asian portfolio managers. Originality/value This paper contributes to the limited research on the cyclical return and co-movement dynamics among major public real estate markets during financial/economic crisis in international finance. Moreover, the frequency-domain analysis conducted in this paper adds to better understanding regarding the impact of GFC on the cyclical return volatility and co-movement dynamics of major developed public real estate markets in international investing.

The need for more research on the Asian real estate markets

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Graeme Newell
Keyword(s):  
Real Estate ◽  
Research Agenda ◽  
Real Estate Investment ◽  
High Quality ◽  
High Quality Research ◽  
Quality Research ◽  
Content Type ◽  
Real Estate Markets ◽  
Research Opportunities ◽  
Real Estate Research

PurposeThe Asian real estate markets have grown considerably in recent years and have taken on increased investment importance, particularly with significant developments in the emerging markets in Asia. This paper assesses the opportunities for more research on the Asian real estate markets, by highlighting the significance of Asia real estate, the drivers behind this growth and the unique opportunities this presents for high-quality real estate research, by both local researchers and their international colleagues. Strategies for delivering this research agenda are also identified.Design/methodology/approachThis research is based on a thorough understanding of the Asian real estate markets, based on my own research agenda, personal interactions, insights and extensive discussions with real estate leaders in the Asian markets. This is supported by a clear understanding of the real estate research opportunities in the Asian markets and the strategies needed to deliver this research agenda in an effective manner.FindingsA range of real estate research areas are identified to increase the level of Asian real estate research. This sees research opportunities around key areas such as market dynamics, real estate investment vehicles, alternate real estate sectors, infrastructure and sustainability. Strategies for expanding this level of research for both local and international real estate researchers are also identified.Practical implicationsWith the Asian real estate markets taking on more importance with many international real estate investors, it is important to see more high-quality research into these dynamic real estate markets. This research will see a fuller understanding of these Asian real estate markets to enable more informed real estate investment decision-making.Originality/valueThe need for more high-quality research into the Asian real estate markets is clearly presented, with enabling strategies to achieve this agenda identified. This will see expanded research opportunities to critically research these unique real estate markets and produce high-quality research publications.

Do cross-border investors benchmark commercial real estate markets?

2020 ◽  
Vol 13 (1) ◽  
pp. 83-103
Author(s):  
Cay Oertel ◽  
Jonas Willwersch ◽  
Marcelo Cajias
Keyword(s):  
Relative Risk ◽  
Real Estate ◽  
Risk Premia ◽  
Commercial Real Estate ◽  
Target Market ◽  
Nonlinear Relationship ◽  
Content Type ◽  
Real Estate Markets ◽  
Cross Border ◽  
Relative Attractiveness

Purpose The purpose of this study is to introduce a new perspective on determinants of cross-border investments in commercial real estate, namely, the relative attractiveness of a target market. So far, the literature has analyzed only absolute measures of investment attractiveness as determinants of cross-border investment flows. Design/methodology/approach The empirical study uses a classic ordinary least squares estimation for a European panel data set containing 28 cities in 18 countries, with quarterly observations from Q1/2008 to Q3/2018. After controlling for empirically proven explanatory covariates, the model is extended by the new relative measurement based on relative yields/cap rates and relative risk premia. Additionally, the study applies a generalized additive mixed model (GAMM) to investigate a potentially nonlinear relationship. Findings The study finds on average a ceteris paribus, statistically significant lagged influence of the proxy for relative attractiveness. Nonetheless, a differentiation is needed; relative risk premia are statistically significant, whereas relative yields are not. Moreover, the GAMM confirms a nonlinear relationship for relative risk premia and cross-border transaction volumes. Practical implications The results are of interest for both academia and market participants as a means of explaining cross-border capital flows. The existing knowledge on determinants is expanded by relative market attractiveness, as well as an awareness of nonlinear relationships. Both insights help to comprehend the underlying transaction dynamics in commercial real estate markets. Originality/value Whereas the existing body of literature focuses on absolute attractiveness to explain cross-border transaction activity, this study introduces relative attractiveness as an explanatory variable.

The dynamics of return co-movements and volatility spillover effects in Greater China public property markets and international linkages

2014 ◽  
Vol 32 (6) ◽  
pp. 610-641 ◽  
Author(s):  
Kim Hiang Liow
Keyword(s):  
Real Estate ◽  
Spillover Effects ◽  
Real Estate Market ◽  
Market Volatility ◽  
Volatility Spillover ◽  
Content Type ◽  
Real Estate Markets ◽  
Volatility Spillovers ◽  
Public Property ◽  
Property Markets

Purpose – The purpose of this paper is to examine weekly dynamic conditional correlations (DCC) and vector autoregressive (VAR)-based volatility spillover effects within the three Greater China (GC) public property markets, as well as across the GC property markets, three Asian emerging markets and two developed markets of the USA and Japan over the period from January 1999 through December 2013. Design/methodology/approach – First, the author employ the DCC methodology proposed by Engle (2002) to examine the time-varying nature in return co-movements among the public property markets. Second, the author appeal to the generalized VAR methodology, variance decomposition and the generalized spillover index of Diebold and Yilmaz (2012) to investigate the volatility spillover effects across the real estate markets. Finally, the spillover framework is able to combine with recent developments in time series econometrics to provide a comprehensive analysis of the dynamic volatility co-movements regionally and globally. The author also examine whether there are volatility spillover regimes, as well as explore the relationship between the volatility spillover cycles and the correlation spillover cycles. Findings – Results indicate moderate return co-movements and volatility spillover effects within and across the GC region. Cross-market volatility spillovers are bidirectional with the highest spillovers occur during the global financial crisis (GFC) period. Comparatively, the Chinese public property market's volatility is more exogenous and less influenced by other markets. The volatility spillover effects are subject to regime switching with two structural breaks detected for the five sub-groups of markets examined. There is evidence of significant dependence between the volatility spillover cycles across stock and public real estate, due to the presence of unobserved common shocks. Research limitations/implications – Because international investors incorporate into their portfolio allocation not only the long-term price relationship but also the short-term market volatility interaction and return correlation structure, the results of this study can shed more light on the extent to which investors can benefit from regional and international diversification in the long run and short-term within and across the GC securitized property sector, with Asian emerging market and global developed markets of Japan and USA. Although it is beyond the scope of this paper, it would be interesting to examine how the two co-movement measures (volatility spillovers and correlation spillovers) can be combined in optimal covariance forecasting in global investing that includes stock and public real estate markets. Originality/value – This is one of very few papers that comprehensively analyze the dynamic return correlations and conditional volatility spillover effects among the three GC public property markets, as well as with their selected emerging and developed partners over the last decade and during the GFC period, which is the main contribution of the study. The specific contribution is to characterize and measure cross-public real estate market volatility transmission in asset pricing through estimates of several conditional “volatility spillover” indices. In this case, a volatility spillover index is defined as share of total return variability in one public real estate market attributable to volatility surprises in another public real estate market.

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