scholarly journals International Real Estate Review

2019 ◽  
Vol 22 (2) ◽  
pp. 275-306
Author(s):  
Jérôme Coffinet ◽  
◽  
Etienne Kintzler ◽  
Keyword(s):  
Real Estate ◽  
Interest Rates ◽  
Fair Value ◽  
Increasing Trend ◽  
Office Market ◽  
Low Interest Rates

We develop a simple framework to assess the position of office prices with respect to their fundamentals. Applying the model to France, we show that a constrained office supply and low interest rates mainly explain for the high and increasing trend of office prices in recent years. Nonetheless, we find that the office market is only slightly overvalued in France in late 2017: the deviation of office prices with respect to their fundamental determinants is between 0% and 10%, thus indicating that the market is close to fair value.

Auswirkungen der anhaltenden Niedrigzinsen auf das Versicherungswesen

2015 ◽  
Vol 64 (2) ◽  
Author(s):  
Heinrich R. Schradin
Keyword(s):  
Interest Rates ◽  
Life Insurance ◽  
Insurance Industry ◽  
Fair Value ◽  
Cash Flows ◽  
Capital Adequacy ◽  
Data Set ◽  
Life Insurers ◽  
Low Interest Rates ◽  
German Life

AbstractFocusing the perspective of German life insurance industry, this article starts with a brief description and discussion of the financial impact of the persistently low interest rate environment. Based on an empirical data set of German life insurers, the author illustrates actual limitations to generate sufficient investment income for to meet the given specific financial guarantees. Moreover, the core problem, caused by the use of volatile timingrelated interest rates for to evaluate long-term cash flows, becomes obvious. The currently observed regulatory interventions are trying to overcome the existential consequences of the so-called fair value measurement. In consequence, the author derives four central theses:1. Life insurance in Germany suffers from insufficient capital adequacy.2. Persistent low interest rates threaten the fulfillment of financial guaranty commitments of German life insurers.3. The generally accepted principals of economic evaluation do not satisfy to the traditional business model of German life insurers.4. Under a business perspective, the development of new life insurance products is inevitable.

A Nation of Gamblers: Real Estate Speculation and American History

2013 ◽  
Vol 103 (3) ◽  
pp. 1-42 ◽  
Author(s):  
Edward L Glaeser
Keyword(s):  
Real Estate ◽  
General Equilibrium ◽  
Interest Rates ◽  
American History ◽  
Las Vegas ◽  
Simple Heuristic ◽  
Default Options ◽  
Low Interest Rates ◽  
Price Growth ◽  
The Impact

The great housing convulsion that buffeted America between 2000 and 2010 has historical precedents, from the frontier land boom of the 1790s to the skyscraper craze of the 1920s. But this time was different. There was far less real uncertainty about fundamental economic and geographic trends, making the convulsion even more puzzling. During historic and recent booms, sensible models could justify high prices on the basis of seemingly reasonable projections about stable or growing prices. The recurring error appears to be a failure to anticipate the impact that elastic supply will eventually have on prices, whether for cotton in Alabama in 1820 or land in Las Vegas in 2006. Buyers don't appear to be irrational but rather cognitively limited investors who work with simple heuristic models, instead of a comprehensive general equilibrium framework. Low interest rates rarely seem to drive price growth; underpriced default options are a more common contributor to high prices. The primary cost of booms has not typically been overbuilding, but rather the financial chaos that accompanies housing downturns.

The Right of Acquisition: Options in Commercial Real Estate

2017 ◽  
pp. 1-10
Author(s):  
Craig Furfine ◽  
Mitchell Petersen
Keyword(s):  
Real Estate ◽  
Interest Rates ◽  
Real Options ◽  
Fair Value ◽  
Commercial Real Estate ◽  
List Type ◽  
Discounted Cash Flow ◽  
Real Options Theory ◽  
The Real Estate ◽  
The Right

In April 2012 Bill Nichols, a financial analyst at the real estate investment firm Koenig Capital, was about to enter a unique lease renegotiation. One of Koenig's tenants, Hasperat Inc., had sixteen years left on its long-term lease of the Kelley Building, a 165,000-square-foot office building in downtown Cleveland. The lease contained a clause giving Hasperat the option to buy the Kelley Building from Koenig. When Nichols tried to place a mortgage on the property to take advantage of low interest rates, he learned that the existence of this option in the lease contract prevented lenders from offering Koenig their lowest rates. As a result, Nichols had been tasked with renegotiating the lease to remove the option clause. This unexpected event offered Nichols the opportunity to use his financial skills. He needed to calculate the fair value of the purchase option to be able to justify to his superiors by how much they should compensate Hasperat. Students will step into the role of Bill Nichols and apply real options modeling techniques to value the purchase option in Hasperat's lease.After reading and analyzing the case, students will be able to: Apply real options theory to the valuation of a purchase option in a commercial real estate lease Identify the common mistakes in applying traditional discounted cash flow (DCF) analysis to financial problems with option components

scholarly journals Twenty Years of Mortgage Banking in Slovakia

2020 ◽  
Vol 8 (3) ◽  
pp. 56
Author(s):  
Eva Horvatova
Keyword(s):  
Real Estate ◽  
Interest Rates ◽  
Real Estate Market ◽  
Data Envelopment ◽  
The Real ◽  
The Real Estate ◽  
The Real Estate Market ◽  
Low Interest Rates ◽  
Real Estate Prices ◽  
Analysis Models

Mortgage banking began to develop in Slovakia after 1998 as an ambitious project, the goal of which was to elevate the lagging development of the real estate market, the development of the financial market and the creation of banks’ long-term resources. Our goal is a comprehensive assessment of the development of Slovak mortgage banking for the past 20 years from the perspectives of the development of banking, the mortgage bond market, the real estate market and selected interactions between individual elements of the mortgage system. The specific aim of the study is to evaluate the substantial links between the basic economic indicators, indicators of housing finance and real estate prices in Slovakia. To evaluate these issues VAR (Vector Autoregression) models, models of panel and linear regression and DEA (Data Envelopment Analysis) models were used. Slovakia has specific indicators of the development of mortgage banking, adequate to its historical and economic development. It was confirmed that the availability of real estate loans had a significant impact on the increase in real estate prices. Real estate prices in Bratislava have different development factors than real estate prices from a nationwide perspective. Low interest rates have an important role in housing financing. The second part of the study is oriented towards an evaluation of the technical efficiency of individual banks. The results of DEA point out that the largest banks in Slovakia were the most efficient in the pre-crisis year 2007. The overall results show that policymakers should react not only to the household indebtedness rate and risks for individual clients, but should also see the risks for banks in possible changes in the real estate market, or the risks of changes in interest rates in the future.

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