Comovement in UK real estate sector returns

Engle et al. (1990) distinguish between 'heat waves' and 'meteor showers' in an analogy which tries to differentiate between particular effects, not transmitted among markets, and general effects, which tend to affect all the markets, although different markets can be affected to different degrees. This paper applies this approach to the study of the monthly returns of four real estate market sectors: Office, Retail, Industrial and Retail Warehouses in the UK over the period 1979:2 to 1997:12. A VAR methodology used with the aim of detecting the causal relations and dynamic interactions among sector returns, as well as the transmission mechanisms of their information flows. The results obtained permit us to conclude that there is a good deal of integration between the monthly return time series for all the sectors. Therefore, diversification across real estate market sectors does not allow for the reduction of risk without sacrificing expected returns.

Predicting the annual performance of UK real estate: timeliness versus coverage

The IPD Annual Index is the largest and most comprehensive Real Estate market index available in the UK Such coverage however inevitably leads to delays in publication. In contrast there are a number of quarterly and monthly indices which are published within days of the year end but which lack the coverage in terms of size and numbers of properties. This paper analyses these smaller but more timely indices to see whether such indices can be used to predict the performance of the IPD Annual Index. Using a number of measures of forecasting accuracy it is shown that the smaller indices provide unbiased and efficient predictions of the IPD Annual Index. Such indices also significantly outperform a naive no-change model. Although no one index performs significantly better than the others. The more timely indices however do not perfectly track the IPD Annual Index. As a result any short run predictions of performance will be subject to a degree of error. Nevertheless the more timely indices, although lacking authoritative coverage, provide a valuable service to investors giving good estimates of Real Estates performance well before the publication of the IPD Annual Index.

Domestic and foreign bias in global real estate mutual fund investment allocations

The purpose of the study is to seek a better understanding of the investment allocation behaviour of the real estate mutual funds by focusing on asset allocation at the country level. Analysing the country allocation of 553 real estate mutual funds domiciled in 20 countries, we attempt to trace how investment bias exists across countries and affects their country allocations. Our results evidence the existence of disproportionate country allocation to their domestic markets (domestic bias) and to each foreign market (foreign bias). We also find each bias is influenced by different sets of variables: real estate market influences for domestic bias and familiarity influences for foreign bias. This difference in factors influential for each bias in part explains the conflated relationship between the two biases.

Real estate markets and the macroeconomy: a dynamic coherence framework

This paper analyzes the dynamic interactions between real estate markets, in the US and the UK and their macroeconomic environments. We apply a new approach based on a dynamic coherence function (DCF) to study these interactions bringing together different real estate markets (the securitized market, the commercial market and the residential market). The results suggest that there is a common trend that drives the different real estate markets in the UK and the US, particularly in the long run, since they have a similar shape of the DCF. We also find that, in the US, wealth and housing expenditure channels are very conductive during real estate crises. However, in the UK, only the wealth effect is significant as a transmission channel during real estate market downturns. In addition, real estate markets in the UK and the US react differently to institutional shocks. This brings some insights on the conduct of monetary policy in order to avoid disturbances in real estate markets.

Cross-border capital flows into real estate

This study investigates the determinants of cross-border capital flows into direct real estate markets. In particular, it investigates how existing institutional, regulatory and real estate specific barriers affect cross-border real estate inflows and outflows in a sample of 24 developed and emerging countries, and whether investors seek out targets with lower barriers and regulatory arbitrage. We do not find evidence of significant cross-border institutional or regulatory arbitrage in the real estate market. However, real estate market liquidity is found to be the most important driver of cross-border flows. While many of the institutional barriers included in this analysis do not appear to impact the level of real estate inflows significantly, their presence tends to suppress real estate capital outflows to other countries. Overall, easy access to financial markets, a good economic environment and transparent real estate markets may enhance real estate outflows, while returns and the macroeconomy are found to enhance domestic real estate investment.

Assessing the accuracy and dispersion of real estate investment forecasts

Existing empirical evidence has frequently observed that professional forecasters are conservative and display herding behaviour. Whilst a large number of papers have considered equities as well as macroeconomic series, few have considered the accuracy of forecasts in alternative asset classes such as real estate. We consider the accuracy of forecasts for the UK commercial real estate market over the period 1999-2011. The results illustrate that forecasters display a tendency to under-estimate growth rates during strong market conditions and over-estimate when the market is performing poorly. This conservatism not only results in smoothed estimates but also implies that forecasters display herding behaviour. There is also a marked difference in the relative accuracy of capital and total returns versus rental figures. Whilst rental growth forecasts are relatively accurate, considerable inaccuracy is observed with respect to capital value and total returns.

The direction of media influence: Real-estate news and the stock market

This paper uses a novel identification strategy to test the influence of news media on the stock market. Because the stock market does not impact the media coverage of the housing market, a relationship between real-estate news and shares of companies engaged in the housing market is attributable media influence. I find that the content of reporting exhibits a significant relationship with stock returns, and the amount of news with the number of trades. These relationships exist even after controlling for known risk factors, housing market performance and intra-week correlation. This finding is consistent with the function of the media as a source of information and sentiment in financial markets.

Value creation in the nursing home real estate investment market - A case study

The underlying thesis examines the value drivers of direct investments in nursing home real estate in Germany. A survey among investors and operators is conducted in order to identify significant value drivers. Moreover, based on survey results, a framework for assessing German nursing home real estate is developed. This is applied in a case-study about the set-up of a nursing home value-add fund which will demonstrate the value creation process of redeveloping an existing nursing home real estate portfolio. Through a concluding analysis the sources of value creation, sensitivities and future prospects of direct investing into German nursing home real estate are concluded.

Can institutional investors bias real estate portfolio appraisals? Evidence from the market downturn

This paper investigates the extent to which institutional investors may have influenced independent real estate appraisals during the financial crisis. A conceptual model of the determinants of client influence on real estate appraisals is proposed. It is suggested that the extent of clients’ ability and willingness to bias appraisal outputs is contingent upon market and regulatory environments (ethical norms and legal and institutional frameworks), the salience of the appraisal(s) to the client, financial incentives for the appraiser to respond to client pressure, organisational culture, the level of moral reasoning of both individual clients and appraisers, client knowledge and the degree of appraisal uncertainty. The potential of client influence to bias ostensibly independent real estate appraisals is examined using the opportunity afforded by the market downturn commencing in 2007 in the UK. During the market turbulence at the end of 2007, the motivations of different types of owners to bias appraisals diverged clearly and temporarily provided a unique opportunity to assess potential appraisal bias. We use appraisal-based performance data for individual real estate assets to test whether there were significant ownership effects on performance during this period. The results support the hypothesis that real estate appraisals in this period reflected the differing needs of clients.

Explanation of changes in real estate stock market

The aim of this study is to explain the changes in the real estate prices as well as in the real estate stock market prices, using some macro-economic explanatory variables, such as the gross domestic product (GDP), the real interest rate and the unemployment rate. Several regressions have been carried out in order to express some types of incremental and absolute deflated real estate lock market indexes in terms of the macro-economic variables. The analyses are applied to the Swedish economy. The period under study is 1984-1994. Time series on monthly data are used. i.e. the number of data-points is 132. If time leads/lags are introduced in the e regressions, significant improvements in the already high correlations are achieved. The signs of the coefficients for IR, UE and GDP are all what one would expect to see from an economic point of view: those for GDP are all positive, those for both IR and UE are negative. All the regressions have high R2 values. Both markets anticipate change in the unemployment rate by 6 to 9 months, which seems reasonable because such change can be forecast quite reliably. But, on the contrary, there is no reason why they should anticipate by 3-6 months changes in the interest rate that can hardly be reliably forecast so far in advance.

The Brazilian real estate securitization market: determinants of pricing

Analisamos os determinantes de precificação de Certificados de Recebíveis Imobiliários (CRIs) com relação ao ativo objeto e níveis de garantias, controlando por variáveis de tamanho, prazo e rating. Verifica-se um prêmio médio adicional em CRIs de 1,0 p.p. quando comparados com debêntures de prazos semelhantes e de mesmo rating. A justificativa desse prêmio é analisada em duas frentes: (a) apesar de CRI seguir relativa padronização, encontramos que o papel pode representar diferentes níveis de risco e ativos-objeto; e (b) essa falta de padronização leva a níveis de precificação diferenciados por suas características específicas de riscos. Os diferentes níveis de risco são percebidos pelas diversas garantias utilizadas sendo que 41% das emissões possuem garantias pessoais de originadores (aval ou fiança). Conclui-se que existe, em geral, uma diferença de retornos positiva (o spread médio na emissão dos CRIs indexados à inflação foi de 321 bps superior à curva de juros de mercado), sendo mais preponderante a depender do segmento (prêmio para os segmentos residencial e loteamentos) e mitigado pelo nível de garantias oferecido. É possível verificar um prêmio médio de 1,4 p.p. para os segmentos residencial e de loteamentos. Algumas características das emissões foram analisadas como controle (tamanho, prazo e, por fim, das notas e origem da agência avaliadora de rating). Os CRIs de maior volume e maior prazo apresentam spreads menores. Quanto ao rating, os CRIs apresentam efeitos diversos a depender do segmento. Para CRIs residenciais, o efeito é positivo (redução de spread) caso a emissão seja avaliada por alguma agência de rating, enquanto que para os CRIs comerciais, o efeito é negativo. O efeito pode ser positivo para os CRIs comerciais (redução de spread) em caso de avaliação por agência de rating internacional ou possuir notas de rating superiores à nota ‘A’.

A study of the impact of airports on the market value of real estate in the adjacent areas: New York International Airport, Chicago-O'Hare International Airport, San Francisco International Airport, (United States Naval Air Station, Glenview, Illinois), (United States Naval Air Station, Moffett Field, California)

Cover title: Airport study, 1960.

Real estate agency practice and profitability : an analysis of house sales and agency profitability in Sydney

Large cities provide a broad range of residential property types, as well as a range of socio-economic locations. This results in a significant variation in residential property prices across both the city itself and the individual suburbs. The only constant across such a diverse range of residential property is the need for the majority of residential property owners to employ the services of a real estate agent to sell their property or to purchase a residential property. This paper will analyse the Sydney residential property market over the period 1994 to 2002 to determine the change in real estate offices numbers over the period, the profitability of real estate agency offices based on the residential house price performance of houses and units in these specific locations and the extent of changing residential house prices on agency profitability. Suburbs have been selected to provide a full range of housing types, socio-economic areas, older established and developing residential suburbs and location from the

The true cost and performance of individual residential property investment and the implication on real estate agency practice

Investment in residential property in Australia is not dominated by the major investment institutions in to the same degree as the commercial, industrial and retail property markets. As at December 2001, the Property Council of Australia Investment Performance Index contained residential property with a total value of $235 million, which represents only 0.3% of the total PCA Performance Index value. The majority of investment in the Australian residential property market is by small investment companies and individual investors. The limited exposure of residential property in the institutional investment portfolios has also limited the research that has been undertaken in relation to residential property performance. However the importance of individual investment in residential property is continuing to gain importance as both individuals are now taking control of their own superannuation portfolios and the various State Governments of Australia are decreasing their involvement in the construction of public housing by subsidizing low-income families into the private residential property market. This paper will: • Provide a comparison of the cost to initially purchase residential property in the various capital city residential property markets in Australia, and • Analyse the true cost and investment performance of residential property in the main residential property markets in Australia based on a standard investment portfolio in each of the State capital cities and relate these results to real estate marketing and agency practice.

The impact of spin on Australian real estate journalism : a Queensland study

Regardless of ‘bear’ or ‘bull’ markets, the great Australian dream remains to own your own home. Central to this dream of home ownership is unflagging interest in the property market, reflected in bulging real estate news sections of newspapers in South East Queensland, the focus area for this thesis research. While there has been much scholarly research into other areas of public relations spin and its impact on news-gathering processes, there appears to be next to no research on real estate spin, how it is prepared and by whom, and journalism’s attitude to and the managing of the spin. Real estate spin remains an under-researched topic requiring further investigation not only in South East Queensland but Australia-wide given the ‘big bucks’ allotted to the promotion of real estate and the income it generates for news media outlets, particularly newspapers. This thesis examines the influence of public relations practitioners and journalists specialising in real estate spin through interviews, content analysis, and how real estate spin envelopes itself in today’s society. From content analyses and observations of journalism in the real estate rounds of the two major newspapers in South East Queensland, I found that journalists were using massive quantities of real estate spin supplied by PR practitioners and other associated industry sources. This spin is supplanting investigative newsroom journalism, thus allowing newspapers to operate with minimal staffing levels yet still able to publish large weekly real estate news sections. My research also revealed growing commercialisation of real estate news through increasing outsourcing of journalistic work to a writing bureau, which could jeopardise both the professions of journalism and public relations in the future.