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Article

Yang Yang, Mingquan Zhou and Michael Rehm

The purpose of this paper is twofold. First, the study aims to test whether expectations are adaptive in the Auckland housing market. The second purpose is to examine the…

Abstract

Purpose

The purpose of this paper is twofold. First, the study aims to test whether expectations are adaptive in the Auckland housing market. The second purpose is to examine the interplay between expectations and Auckland housing prices.

Design/methodology/approach

In this study, two vector error correction models (VECM) are built: one VECM includes survey-based expectations and another one encompasses model-based expectations with the assumption that property investors’ expectations are adaptive. The paper goes on by comparing and examining the results of Granger causality tests and impulse response analyses.

Findings

The findings reveal that Auckland property buyers’ expectations are adaptive. In addition, this study provides some evidence of a feedback cycle between Auckland housing prices and expectations.

Research limitations/implications

This study posits that Auckland property buyers’ expectations in the next 12 months are based on three-year price movements with more emphasis being placed on recent price history. This assumption may not be an accurate reflection of true expectations.

Practical implications

This paper helps policymakers to deepen their understanding of Auckland property buyers by showing that their expectations form through the extrapolation of the past price trend.

Originality/value

The study possibly marks the first attempt to test and compare the relationship between housing prices and two forms of expectations: survey-based and model-based. Additionally, this study is probably the first one that empirically examines whether there is a feedback cycle between expectations and property prices in the Auckland housing market.

Details

International Journal of Housing Markets and Analysis, vol. 13 no. 4
Type: Research Article
ISSN: 1753-8270

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Article

Moshe Szweizer

The purpose of this study is to provide a chaos theory-based framework, which can be used to model commercial property market dynamics.

Abstract

Purpose

The purpose of this study is to provide a chaos theory-based framework, which can be used to model commercial property market dynamics.

Design/methodology/approach

The paper is presented in two parts. In the first, rigorous mathematical reasoning is entertained, so to derive an attractor describing a set of feedback formulae. In the second part, the attractor definition is used to model the Auckland commercial office market. The model is exposed through a set of seven scenarios allowing for analysis of the market behaviour under various exogenously imposed conditions.

Findings

The general behaviour of the model is in agreement with the commercial property market conduct observed in Auckland. The model provides information related to the market turning points and allows for an explanation of some intricate market dynamics. These include the anatomy of a market peak and its response to the liquidity oversupply.

Practical implications

The model may be used to expand our understanding of the market performance under various exogenically imposed conditions, which allows for planning of market interventions in a more refined manner.

Originality/value

The paper is original, in the way the chaos theory is applied to the property markets modelling and allows for expanding the understanding of the market behaviour.

Details

Journal of Property Investment & Finance, vol. 38 no. 6
Type: Research Article
ISSN: 1463-578X

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Article

Moshe Szweizer

The purpose of this paper is to expand our understanding of processes governing commercial property cycles, and to provide tools, which enable identification of property

Abstract

Purpose

The purpose of this paper is to expand our understanding of processes governing commercial property cycles, and to provide tools, which enable identification of property cycles’ turning points’ location.

Design/methodology/approach

This paper is divided into three parts. The first looks at the demand-supply dynamics and the location of two characteristic cyclic points, the market bottom and the cycle commencement. In the second part a property relevant formula for entropy is derived, and its relation to the cycle overheated stage and the market peak is studied. In the third part, we discuss still another characteristic point of the cycle, which relates to the stage when developers elect to undertake new projects. This analysis is done by employing the chaos theory, and its relation to the cyclic evolution.

Findings

It is found that some markets cycle, while others fluctuate only. A clear method for distinguishing among these is provided. The bottom of a cycle may overlap or be time separated from the start of a subsequent cycle. Market peaks are characterised by a sharp decrease in financial component to entropy for top quality building grades. A cycling market is characterised by crossing of a distinct vacancy rate during the cycle progression.

Practical implications

The tools developed in the paper allow for clear characterisation of the market types and their cyclic behaviour. This in turn allows for timely characterisation of the market state and for short time-frame forecasting. The depth of a cycle may be calculated and the subsequent correction level estimated.

Originality/value

The paper utilises cross-field approach by taking methods from both physics and mathematics and applying them to property markets. It breaks new ground both in property research and in applied mathematics by showing how the current frontier in pure mathematics may be applied to property.

Details

Journal of Property Investment & Finance, vol. 37 no. 5
Type: Research Article
ISSN: 1463-578X

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Article

Lydia Cheung and Mario Andres Fernandez

This study aims to test whether the size of and distance to the nearest green space has any effects on residential property transaction prices in Auckland, New Zealand.

Abstract

Purpose

This study aims to test whether the size of and distance to the nearest green space has any effects on residential property transaction prices in Auckland, New Zealand.

Design/methodology/approach

This paper divides all green spaces in Auckland into three categories, namely, urban parks, regional reserves and volcanic parks (a unique feature in Auckland, New Zealand). This study uses six years of residential property transaction data to estimate hedonic price regressions. For each property, this paper calculates the size of and distance to the nearest park in each category.

Findings

The logged sizes of the nearest regional reserve and volcanic park have positive effects on property prices. The logged distances to the nearest urban park and volcanic park are insignificant, while the logged distance to the nearest regional reserve is positively significant. In other words, homebuyers prefer larger regional reserves and volcanic parks and prefer to be further away.

Originality/value

Auckland is ranked as a top-five city in the world in terms of the proportion of public green space, trailing four European cities. However, because of Auckland’s much younger age, it presents a very different urban form. The study shows that the distribution of green space (not only its total amount) can bring negative capitalization on property prices.

Details

International Journal of Housing Markets and Analysis, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1753-8270

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Article

Deborah Levy and Gemma Peterson

The purpose of this paper is to explore how the availability of sustainable buildings may affect the decisions made by office occupiers in their building selection process.

Abstract

Purpose

The purpose of this paper is to explore how the availability of sustainable buildings may affect the decisions made by office occupiers in their building selection process.

Design/methodology/approach

The structure of the paper includes a review of both the sustainability literature and traditional location literature which serves to inform the study. A qualitative study comprising 13 in‐depth one‐to‐one interviews with decision makers of a variety of organisations who have chosen to locate in a “sustainable” building within the central business district in Auckland, New Zealand is undertaken.

Findings

The research suggests that selecting a building that is perceived to be sustainable by the market may not be the ultimate driving factor in the office location decision and that more emphasis is placed on micro location factors, attractiveness to staff, marketing and flexibility. The importance of each of these factors tends to be influenced by the size and type of organisation as well as the availability of suitable buildings in the market. The research reinforces the finding that organisations generally seek accommodation that can “add value” to their specific business.

Practical implications

The study provides a deeper understanding on the impact of the emergence of sustainable buildings in the decision‐making process of office tenants and how this may be affected by the size and type of the occupier organisation. These findings will be of practical application to property professionals involved in the development, sale and valuing of sustainable buildings.

Originality/value

This paper provides in‐depth insights into business location decisions from the perspective of a variety of tenants choosing to locate within a CBD.

Details

Journal of Property Investment & Finance, vol. 31 no. 3
Type: Research Article
ISSN: 1463-578X

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Article

Olga Filippova

The purpose of this paper is to explore the changes in commercial office occupiers’ preferences in their building choice as a result of a recent natural disaster which…

Abstract

Purpose

The purpose of this paper is to explore the changes in commercial office occupiers’ preferences in their building choice as a result of a recent natural disaster which triggered policy changes in building safety.

Design/methodology/approach

This study follows a qualitative research design comprising semi-structured one-on-one interviews with 24 property professionals (commercial leasing agents and property managers) in Auckland, New Zealand. A thematic analysis was employed for identifying, analysing and reporting themes emerged within data.

Findings

Tenants across New Zealand now incorporate earthquake issues in their leasing decisions. Most tenants are familiar with the impending policy changes related to earthquake-prone buildings. The degree to which building standards are incorporated into office occupiers’ choice varies with the size of the organisation and their willingness to invest in their corporate social responsibility. A certain level of overreaction was observed in tenants’ behaviour in the face of risk and uncertainty following the earthquakes. However, risk appears to be subsiding and emphasis is placed on availability of space in desirable locations.

Research limitations/implications

The findings are limited due to a non-random sample selection and a small sample size. Further quantitative research is required to determine if office tenants place a premium on occupying seismically safe buildings since forthcoming regulatory changes have been announced.

Practical/implications

This study provides evidence that imminent building policy changes are efficient in raising public awareness and informing perceptions of potential losses following a recent natural disaster event. Building owners can potentially capitalise on tenants’ desire to occupy high quality space.

Originality/value

This is the first study that develops the knowledge base identifying the perceptions of tenants about seismic safety of buildings since the Canterbury earthquakes. The study also contributes to the literature on the market effect of policy changes triggered by a focusing event.

Details

Journal of Property Investment & Finance, vol. 34 no. 2
Type: Research Article
ISSN: 1463-578X

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Article

Chung Yim Edward Yiu and Ka Shing Cheung

The repeat sales house price index (HPI) has been widely used to measure house price movements on the assumption that the quality of properties does not change over time…

Abstract

Purpose

The repeat sales house price index (HPI) has been widely used to measure house price movements on the assumption that the quality of properties does not change over time. This study aims to develop a novel improvement-value adjusted repeat sales (IVARS) HPI to remedy the bias owing to the constant-quality assumption.

Design/methodology/approach

This study compares the performance of the IVARS model with the traditional hedonic price model and the repeat sales model by using half a million repeated sales pairs of housing transactions in the Auckland Region of New Zealand, and by a simulation approach.

Findings

The results demonstrate that using the information on improvement values from mass appraisal can significantly mitigate the time-varying attribute bias. Simulation analysis further reveals that if the improvement work done is not considered, the repeat sales HPI may be overestimated by 2.7% per annum. The more quality enhancement a property has, the more likely it is that the property will be resold.

Practical implications

This novel index may have the potential to enable the inclusion of home condition reporting in property value assessments prior to listing open market sales.

Originality/value

The novel IVARS index can help gauge house price movements with housing quality changes.

Details

International Journal of Housing Markets and Analysis, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1753-8270

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Article

Lucy Cradduck

The purpose of this paper is to reduce the potential for litigation by improving valuers’ awareness of water risks. As part of a valuer’s due diligence, the paper provides…

Abstract

Purpose

The purpose of this paper is to reduce the potential for litigation by improving valuers’ awareness of water risks. As part of a valuer’s due diligence, the paper provides guidance as to how to identify such risks by explaining the different types and examining how online search tools can be used in conjunction with more traditional methods to evaluate the probability of these risks occurring.

Design/methodology/approach

The paper builds on prior research, which examined the impact of water to and for valuations. By means of legal/doctrinal analysis, this paper considers relevant issues from the perspective of managing client expectations and needs. In so doing it identifies online tools available to assist in identifying at risk properties and better informing clients.

Findings

While the internet provides a variety of tools to gain access to relevant information, this information most commonly is only provided subject to disclaimer. Valuers need to ensure that blind reliance is not given to use of these tools but that the tools are used in conjunction with individual property inspections.

Research limitations/implications

Although the examples considered primarily are Australian, increasing water risks generally make the issues considered relevant for any jurisdiction. The research will be of particular interests to practitioners in coastal or riverine areas.

Practical implications

Valuation reports are sought for a variety of purposes from a variety of clients. These range from the experienced, knowledgeable developer looking to maximise available equity to the inexperienced, uneducated individual looking to acquire their home and thinking more often than not with their heart not their head. More informed practices by valuers will lead to valuation reports being more easily understood by clients, thus lessening the likelihood of litigation against the valuer for negligence.

Originality/value

The paper highlights the issue of water risks; the need for valuers to properly address potential and actual risks in their reports; and the corresponding need to undertake all appropriate searches and enquiries of the property to be valued. It reinforces the importance of access to the internet as a tool in the valuation process.

Details

Property Management, vol. 34 no. 2
Type: Research Article
ISSN: 0263-7472

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Article

Michael Rehm and Yang Yang

The purpose of this paper is to examine housing speculation in Auckland, New Zealand, the second most unaffordable market in the world.

Abstract

Purpose

The purpose of this paper is to examine housing speculation in Auckland, New Zealand, the second most unaffordable market in the world.

Design/methodology/approach

The study considers rental property purchases from 2002 to 2016 within the Auckland region. The authors apply a simple cash flow model that emulates the before-tax investment calculations used during purchasers’ due diligence. From this model, the authors determine whether purchases involved speculation on capital gains or not and the authors estimate the degree of speculation at the transaction level.

Findings

The authors find that housing speculation in Auckland is endemic and its housing market is a politically condoned, finance-fuelled casino with investors broadly betting on tax-free capital gains.

Social implications

Although political leaders have decried that the “speculation-driven housing bubble in Auckland is a social and economic disaster”, the government’s main anti-speculation tool – the Income Tax Act’s intention test – sits idle and inoperable. By holstering this key policy tool, politicians foster housing speculation and use residential property investment to buttress New Zealand’s asset-based welfare system.

Originality/value

The authors develop novel methods to objectively distinguish speculators from genuine investors, measure the speculative pressure applied by individual rental property purchasers and outline an evidence-based approach to operationalise New Zealand’s currently impotent anti-speculation tool, the intention test.

Details

International Journal of Housing Markets and Analysis, vol. 14 no. 1
Type: Research Article
ISSN: 1753-8270

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Article

Dulani Halvitigala, Laurence Murphy and Deborah Levy

This paper aims to examine the experiences of valuers when valuing market dominant and non‐dominant standard lease structures. The research compares the perceptions and…

Abstract

Purpose

This paper aims to examine the experiences of valuers when valuing market dominant and non‐dominant standard lease structures. The research compares the perceptions and approaches of New Zealand valuers when valuing gross and net leases, two standard lease types commonly utilised in the New Zealand commercial property market.

Design/methodology/approach

The study employs a structured survey of 87 commercial valuers practising in Auckland (where net leases dominate) and Wellington (where gross leases dominate) complemented by in‐depth interviews with senior commercial valuers employed by large national/international multidisciplinary real estate companies.

Findings

The results suggest that valuers find the process of valuing standard non‐dominant lease structures more demanding than valuing dominant leases and tend to be comparatively less confident about carrying out valuations of leases with which they are less familiar. This lack of confidence tends to result from the lack of comparable evidence and the added complexity of the valuation process requiring additional valuer expertise and judgement. In addition the study uncovers the adoption of place‐based differential valuation practices that have built up over time between the two centres under study.

Originality/value

The paper contributes to the literature relating to valuer behaviour by revealing that even within one country with the same rules and professional standards different valuation practices may evolve. This study specifically identifies different dominant lease structures as being one of the reasons for these differential valuation practices. The findings also highlight the difficulties perceived by valuers when valuing non‐dominant leases and in turn this may have implications when comparing the valuation outcomes of similar buildings within different markets.

Details

Journal of Property Investment & Finance, vol. 29 no. 6
Type: Research Article
ISSN: 1463-578X

Keywords

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