Downside beta and the cross-sectional determinants of listed property trust returns

This study examines the importance of downside beta when seeking to explain variations in listed property trust (LPT) returns in Australia between 1993 and 2005. The results reveal that downside beta outperforms conventional beta and provides higher explanatory power to the cross-sectional LPT return variations. The results also indicate that investors only require a premium for downside risk. However, the explanatory power of downside beta has diminished once the co-kurtosis of LPTs is controlled. Interestingly, the results also reveal that by itself downside beta is unable to fully explain returns in line with strong evidence for momentum and book-to-market ratio. The findings provide additional insights for investors and real estate analysts into the pricing of LPTs.

Momentum profits in Australian listed property trusts

This paper examines the profitability of momentum trading strategies in Australian listed property trusts (LPTs). Monthly value-weighted momentum portfolios are formed using the monthly excess returns of LPTs for the period from 1990 to 2005. Overall the findings confirm that a momentum trading strategy in Australian LPTs is a profitable strategy. More specifically, momentum strategies are profitable after adjusting for variance and downside risk where the momentum returns substantially outperform the benchmark. An analysis using different study periods confirm the findings about momentum. The practical implication from this study is that investors can generate substantial abnormal returns by adopting a momentum trading strategy, particularly with a long strategy (i.e. winner portfolios).

The impact of business outsourcing on corporate real estate in India

Driven by Western companies' requirements for efficiency and effectiveness, a trend towards outsourcing of business activities to India and other low-cost countries commenced in the early 1990s and has continued to grow at a surprisingly fast pace. In a relatively short timeframe India has become a global hub for back-office services, although the effect on the urban cities is yet to be fully comprehended. As American and European companies continue to relocate their information technology services and other back office works to the subcontinent, there has been a considerable flow-on effect on Indian corporate real estate. This paper addresses two key questions. Firstly, the factors important for Western companies' outsourcing of organisational activities to India, and secondly, the effect of business outsourcing on corporate real estate locational requirements in India. A survey of corporate real estate representatives in India and the UK was conducted with the results providing an insight into the present state and possible future direction of outsourcing for India. This research presents a unique insight into the impacts of Western business outsourcing on corporate real estate in India, and presents findings that are useful to both organisations seeking to relocate business activities to India and for property market analysts looking to understand drivers behind this sustained demand for Indian corporate real estate.

Understanding cange in residential property markets: Mapping residency of employment data

The changing nature of residential housing markets is due to a large number of influences, although some have a larger effect than others do on house values. Whilst it is extremely difficult to completely disaggregate all influencing factors, it is possible to highlight areas that have a strong relationship with property – one of these is residency of employment. This research investigates these links between residential housing markets as measured by the level of house prices and residency of employment as measured by industry sector employment. It focuses on Local Government Areas in the State of Victoria, Australia and examines change over a ten year period between 1991 and 2001 using census and house price information. It is supported by data sourced from the Australian Bureau of Statistics and the Victorian Government’s Valuer General’s Office. The analysis also considers changes in these employment sectors from Australia’s overall perspective, as well as comparison with changes in Victoria’s overall residency of employment trends. It is assisted by a spatial representation of three 'shift-share' components and property values with the support of a geographical information system (GIS).

Downside systematic risk in Australian listed property trusts

Previous studies on systematic risk have demonstrated the link between financial and management structure determinants and systematic risk. However, systematic risk is estimated by assuming return is normally distributed. This assumption is generally rejected for real estate returns. Therefore, downside systematic risk appears as a more sensible risk measure in estimating market-related risk. This study contributes to this body of knowledge by examining the determinants of downside systematic risk in Australian Listed Property Trusts (LPTs) over 1993-2005. The results reveal that systematic risk and downside systematic risk are empirically distinguishable. More specifically, there is limited evidence on the connection between these financial and management structure determinants and systematic risk. However, downside systematic risk is sensitive to leverage and management structure.

An exploration of the relationship between size and risk in a downside risk framework applied to Malaysian property shares

The relationship between size and risk (systematic and unsystematic risk) has received considerable attention in recent literature. However, these studies employ variance as the risk measure, which the appropriateness for using this risk measure is always questioned by researchers and practitioners due to its underlying strict assumptions. Therefore, there is crucial to adopt an alternative risk measure for ascertaining the relationships. The aim of the study is to examine the relationships between size and systematic downside risk and unsystematic downside risk in line with the theoretical sound of this risk measure. The empirical evidences reveal that the size is strongly correlated with unsystematic downside risk. While, there is a weak inverse relationship between size and systematic downside risk.

Identifying linkages between generations and community development: the effect on residential and retail property

In the analysis of property markets, especially the retail and residential sectors, increasing importance is being given to the role of demography. The impact of economic influences such as interest rate movements, inflation and changes in the labour market are well documented and although these variables are clearly important, they do not incorporate the changing characteristics of the local inhabitants who actually provide the demand. However, demography can provide an invaluable insight into retail and residential property trends, especially over the long term, and are assisted by reliable population datasets with a relatively high level of detail. For example, the emergence of the 'baby boom' generation shift had a substantial effect on demand for retail and housing products, although little consideration has been given to the effect from the subsequent cohorts, namely generations X, Y and Z.

This paper examines the role of demography when researching property markets, with the focus placed on demographic shifts. It discusses trends in a range of demographic variables that have been observed in society. In addition, it highlights linkages with property markets, especially residential and retail property, and draws inferences for long term trends. The study concludes that when conducting research into property markets, it is essential to have a thorough understanding of various demographic variables to predict how they affect demand. An appreciation of the drivers behind generations will assist property researchers to identify future needs, and the subsequent effect this will have on community development involving retail and residential property.

Investigating residential property markets using employment data

The changing nature of residential housing markets is due to a large number of influences, although some factors have a larger effect than others on house values. Whilst it is extremely difficult to completely disaggregate all influencing factors, it is possible to highlight areas that have a strong relationship with property – one of these is employment. Due to the growing importance between housing affordability and the capacity to meet the cost of living the form of regular mortgage repayments or rent, there are clear links between the cost of housing and the ability to pay for the housing product.

The research investigates the links between residential housing markets as measured by the level of house prices and employment as measured by industry sector employment. It focuses on Local Government Areas in the State of Victoria, Australia and examines change over a ten year period between 1991 and 2001 using census and house price information. It is supported by data sourced from the Australian Bureau of Statistics and the Victorian Government’s Valuer General’s Office. The analysis also considers changes in these employment sectors from Australia’s overall perspective, as well as comparison with changes in Victoria’s overall employment trends. It is assisted by a spatial representation of three shiftshare components and property values with the assistance of a geographical information system (GIS).

The Melbourne 2006 Commonwealth Games : what does it mean for the local property market?

In 2006 Melbourne will host the 18th Commonwealth Games with Brisbane being the last Australian city to host this event over two decades ago in 1982. Melbourne has not held a major global sporting event since the 1956 Olympic Games, although the 2006 Commonwealth Games follows on from the successful 2000 Sydney Olympics. These sporting events have continued to grow from strength to strength, and have been assisted by Australia's close affiliation with sport and the widespread global media coverage. In a similar manner to other sporting events that Melbourne hosts, including the Australian Tennis Open, Formula One Grand Prix, Motorcycle Grand Prix, Melbourne Cup and Australian Football League, the city and its inhabitants are consumed by these events. The 2006 Commonwealth Games is certain to follow this trend.
The task of hosting the Commonwealth Games is enormous, although actively pursued in a fierce bidding process by competing cities. The benefits are undisputed and include an influx of visitors to the host city, an opportunity to enhance or rebuild infrastructure such as transport, plus the worldwide focus on the host city before and during the event. A high level of planning is undertaken for years well in advance of the event, and this may have an effect on the surrounding property market. Through the media both buyers and sellers are constantly reminded of the upcoming Games, the venues and the increased demand that will occur. Accordingly, this research investigates the task of hosting a major global sporting event such as the Commonwealth Games, and importantly how affects infrastructure in a host city. Attention is placed on the 2006 Commonwealth Games and the Melbourne property market. Whilst every host city differs in characteristics such as size, location and timing of the event, the findings of this study will assist a future host city to plan for the highly irregular circumstances that accompany a high profile one-off major sporting event.

Property transactions : a note on ethics

Some activities that are applied in the property market to facilitate transactions have the potential to lead to unethical behaviour. Two conditions required for a sale price to be acceptable as market value are that the transaction is at arm’s length and the parties to the transaction are knowledgeable and prudent. The well-known difficulties associated with access to market pricing information are exacerbated by several of these activities including dummy bidding at auctions, two-tier marketing and the provision of lease incentives. Added to these is a common requirement that any negotiation be commercial-in-confidence. The lack of information has the potential to distort the market and this has been well publicised in recent times particularly in the residential market.
The definition of market value is visited and the nature of ethics in property transactions is outlined. Several examples of activities that could lead to unethical behaviour are described. It is concluded that unethical behaviour is hard to identify. Some recommendations are included for consideration and discussion.

The relevance of professional institutions to students and early career practitioners in the property and construction industries within Australia

The role of professional institutions and the transition from student membership to full professional membership among real estate and construction students in Australia is examined. Students’ perceptions of professional qualifications and institution membership is explored to show that graduates seek networking and career advancement opportunities over professional training and development opportunities. The expectation of many young practitioners is that they will work outside Australia during their career and this has significant implications for the future policy development of professional bodies. The paper provides a valuable insight into the aspirations of young professionals and goes some way to identifying the reasons for the low level of transition from student membership to full membership of the national and international professional bodies.

The 1990's property cycle in Hainan

The continuous debate between the radical and the conservative approaches on which one is more suitable for a successful economic transition seems to be in favour of the latter. With the recent upswing in the property market in Hainan, the review of the 1990s property cycle in Hainan is linked with economic transition in China. A case study approach is used to establish the importance of the 1990s Hainan property cycle to the formation process of the Chinese property market system. The analytical framework is an integration of the theories of property cycles and economic transition, using the conceptual model of typical commercial property markets modified according to the historical settings in Hainan. It is found that the 1990s Hainan property cycle is unique in that the economic transition has been the key driving force. The structural imbalance caused by the equally imbalanced reform process in different sectors in Hainan has been proved an unsuccessful practice. By and large, the 1990s cycle in Hainan lasted for about 10 years and was state-driven. It was considered an experiment conducted by the state in testing the radical approach of economic transition in the property and urban land sectors. It is suggested that current knowledge of emerging commercial property markets, especially their cyclical behaviour, is limited at both theoretical and empirical levels. Evidence from the past 15 years seems to suggest that the structural and investment imbalance in the economic transition was the main cause of the high volatility in the Hainan property market in the 1990s. The emergence of a commercial property market seems to require choosing the right places to start reform with great caution on investment structure and the fundame ntals of the real economy. Eventually, it is essential to adopt a systematic view to assess and to make decision in the process of emergence of property cycles, based on the basic demand and supply patterns in a city’s transitional economy.

Economic transition and commercial property cycles in China

Drawn from a recently completed study, this paper aims at a better understanding of commercial property cycles in the transitional economy of China. It examines the behaviour of the property submarket system in China and considers structural changes in the socio-economic system as a primary factor in addressing the research problem. The study suggests that the underlying social and economic structure has greatly determined market behaviour. It finds that radical changes can alter the formal structure (the designed structure) of the market system, including the property market structure, but cannot alter the informal structure (i.e. the emergent structure) at the similar rate. As the study shows, cycles in the commercial property market in the economic transition is largely a key resulting feature of the continuous structural change both at formal and informal levels in a way that is often imbalanced and not always consistently changing together. The same situation also applies to the transformation of inner-city built form, which is featured by a delayed change of physical building stock against the space demand trend that is underpinned by the socio-economic transition. Put simply, there is a supply lag, mainly in the form of changing land use and building stock replacement, against economic change (the business cycle). This affects the level of effective demand for office space and hence becomes a major force in shaping current office cycles.