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Article
Publication date: 14 June 2022

Johnson Kampamba, Simon Kachepa and Kgalaletso Lesobea

The purpose of this study was to assess real estate cycles and their impact on property values in Gaborone, Botswana. Investors and real estate professionals in Botswana rarely…

Abstract

Purpose

The purpose of this study was to assess real estate cycles and their impact on property values in Gaborone, Botswana. Investors and real estate professionals in Botswana rarely assess property cycles when purchasing property. This study therefore, aims to assess whether real estate cycles do exist, their duration and the type of real estate cycle that Botswana experiences.

Design/methodology/approach

Data was collected from primary and secondary sources. This included sourcing out information at the Deeds Registry Office in Gaborone on residential property sales and a questionnaire to 100 property investors. A record was made of properties that were sold for the period of 16 years starting from the year 2000 to 2016. Secondary data on the other hand was also collected from published and unpublished books, academic journals, professional journals, magazines, reports and monographs. A quantitative approach was used in this study. Data was analysed using Microsoft Excel and subsequently presented in form of tables and graphs.

Findings

The findings from the literature review revealed that there are four phases in the real estate cycles (recovery, expansion, oversupply and recession) and each has distinct features that an investor must be aware of to avoid consequences in the property market. The results from the data analysis revealed that real estate cycles do exist in Botswana as identified during the past 16 years. The cycle that Botswana experiences is called the kitchen cycle. It was also evident that Botswana experienced three cycles lasting five to six years each. Furthermore, it was discovered that all phases in the real estate cycles affect property values.

Research limitations/implications

There is relatively little information about property cycles and their timing in Botswana. Therefore, this study may assist valuation surveyors to make promptly informed decisions on property investment through cycle assessment and hence positively inform the public and financial stakeholders. Society might find this beneficial in as far as decision-making is concerned when thinking of investing in real estate. The current system at the deeds office is cumbersome and time consuming, thus making it difficult for the researchers and possibly the public to analyse the property market. This study therefore, may encourage the Deeds Registry Office to computerize their records.

Practical implications

There is relatively little information about property cycles and their timing in Botswana. Therefore, this study may assist valuation surveyors to make promptly informed decisions on property investment through cycle assessment and hence positively inform the public and financial stakeholders.

Social implications

Society might find this beneficial in as far as decision-making is concerned when thinking of investing in real estate.

Originality/value

To the best of the authors’ knowledge, this paper is the first of its kind in Botswana to extend the knowledge of real estate cycles and their impact on property cycles in Botswana.

Details

International Journal of Housing Markets and Analysis, vol. 16 no. 5
Type: Research Article
ISSN: 1753-8270

Keywords

Article
Publication date: 1 December 1995

Tony McGough and Sotiris Tsolacos

Applies the methodology adopted in contemporary business cycleresearch on establishing the stylized facts of aggregate outputfluctuations, in the context of the office, industrial…

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Abstract

Applies the methodology adopted in contemporary business cycle research on establishing the stylized facts of aggregate output fluctuations, in the context of the office, industrial and retail building cycle. The objective of the study is to identify the degree to which cyclical regularities, which are in conformity with theoretical modelling, are identified across property sectors. Undertakes a statistical analysis of the cyclical properties of certain variables in relation to the building cycle in the respective commercial property sectors. The variables considered capture real economic conditions and trends in both the property and investment markets. The findings illustrate that certain variables display a cyclical pattern in relation to the property cycles which is in accordance with theoretical intuition. They also show that either other variables do not display any cyclical relationship to the commercial building cycles or the relationship does not conform to the predictions of the existing theoretical treatment of property development.

Details

Journal of Property Finance, vol. 6 no. 4
Type: Research Article
ISSN: 0958-868X

Keywords

Article
Publication date: 2 August 2013

Richard Grover and Christine Grover

The purpose of this paper is to review what is known about property cycles following the financial crisis of 2008.

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Abstract

Purpose

The purpose of this paper is to review what is known about property cycles following the financial crisis of 2008.

Design/methodology/approach

The method is to review the literature on property cycles published since the 1930s, to examine the extent to which endogenous causes have been identified as distinct from exogenous factors that may have produced cyclicality resulting from weak adjustment mechanisms but not cycles.

Findings

Whilst there is broad consensus that the property market has delays in adjustment which produce oscillations resulting from external shocks, it is more difficult to identify endogenous causes of cycles, though there are some possible candidates, notably technical progress.

Practical implications

The slump after 2008 has cost savers and taxpayers dear, so better means of predicting cycles so that policy makers can mitigate them is desirable.

Originality/value

The debate about whether property cycles result from exogenous shocks or endogenous causes is in danger of being lost sight of. If the former, then the property industry is a channel through which external factors feed through to the economy, albeit magnified by weak adjustment factors. If there are endogenous causes, then policy makers would be unwise to overlook their potential destabilising impact on the economy.

Details

Journal of Property Investment & Finance, vol. 31 no. 5
Type: Research Article
ISSN: 1463-578X

Keywords

Article
Publication date: 9 February 2010

Richard Reed and Hao Wu

This paper aims to review property cycle theory and the relevance of the larger body of knowledge about cycles with reference to the housing market. It also aims to highlight the…

8495

Abstract

Purpose

This paper aims to review property cycle theory and the relevance of the larger body of knowledge about cycles with reference to the housing market. It also aims to highlight the lack of research into property cycles in the residential sector on a suburb or smaller region basis, as well as the potential for increased knowledge about cycles to assist to avoid housing stress.

Design/methodology/approach

The paper conducts a literature review of previous cycle research and encourages the use of cycle theory. It discusses the established body of knowledge about business cycles and the office market sector, as well as investigating levels of housing affordability and how detailed knowledge about property cycles can assist to decrease housing affordability in residential areas, which will eventually experience a downturn.

Findings

It is argued that an increased level of certainty about cycle behaviour in particular suburbs will give households a higher level of confidence when considering whether and when to enter the market. Property cycle research has the potential to assist low‐income homeowners to better understand the characteristics of cycles and associated risks in each residential.

Research limitations/implications

This is a conceptual paper and has conducted a review of cycle research and housing affordability in certain countries. Some areas or countries may be affected to varying degrees by property cycles and levels of housing affordability.

Practical implications

In extended periods of high volatility it is argued that a better understanding of housing cycles will allow more homeowners to avoid negative equity and the stress associated with repossessions. Property cycles are unavoidable although there is typically relatively little information available in the open market about the timing and amplitude of cycles in individual areas.

Originality/value

This paper is unique as it highlights the potential for property cycles to be used to avoid housing stress in the residential market. Traditionally cycle research is used to increase returns and avoid downturns in the office and/or business sectors.

Details

Property Management, vol. 28 no. 1
Type: Research Article
ISSN: 0263-7472

Keywords

Article
Publication date: 1 December 2000

Chris Brooks, Sotiris Tsolacos and Stephen Lee

This paper examines the cyclical regularities of macroeconomic, financial and property market aggregates in relation to the property stock price cycle in the UK. The Hodrick…

2961

Abstract

This paper examines the cyclical regularities of macroeconomic, financial and property market aggregates in relation to the property stock price cycle in the UK. The Hodrick Prescott filter is employed to fit a long‐term trend to the raw data, and to derive the short‐term cycles of each series. It is found that the cycles of consumer expenditure, total consumption per capita, the dividend yield and the long‐term bond yield are moderately correlated, and mainly coincident, with the property price cycle. There is also evidence that the nominal and real Treasury Bill rates and the interest rate spread lead this cycle by one or two quarters, and therefore that these series can be considered leading indicators of property stock prices. This study recommends that macroeconomic and financial variables can provide useful information to explain and potentially to forecast movements of property‐backed stock returns in the UK.

Details

Journal of Property Investment & Finance, vol. 18 no. 6
Type: Research Article
ISSN: 1463-578X

Keywords

Article
Publication date: 3 July 2017

Arvydas Jadevicius and Simon Hugh Huston

The purpose of this paper is to assess the duration of the UK commercial property cycles, their volatility and persistence to gauge future market direction.

4742

Abstract

Purpose

The purpose of this paper is to assess the duration of the UK commercial property cycles, their volatility and persistence to gauge future market direction.

Design/methodology/approach

The study employs a novel approach to dissect cycles in a form of a three-step algorithm. First, the Hodrick-Prescott de-trends the selected variables. Second, volatility (measured by the variance) screens periods of atypical fluctuations in the series. Finally, the series is regressed against its past values to assess the level of persistence. The sequential steps screen the length of the cycles in UK commercial property market to facilitate interpretation.

Findings

The estimates suggest that UK commercial property market follows an eight-year cycle. Combined modelling results indicate that the current market trend is likely to change over the coming year. The modelling suggests increasing probability of a market correction in late 2016/early 2017.

Practical implications

This updated appreciation of the UK commercial property cycle duration allows for better market timing and investment decision making.

Originality/value

The paper adds additional evidence on the contested issue of UK commercial property cycle duration.

Details

Journal of Property Investment & Finance, vol. 35 no. 4
Type: Research Article
ISSN: 1463-578X

Keywords

Article
Publication date: 1 October 2001

Cedric Pugh and Alireza Dehesh

Since 1980, property cycles have emerged emphatically as a phenomenon of urban development in both developed and developing countries. Among the many things which need to be…

4770

Abstract

Since 1980, property cycles have emerged emphatically as a phenomenon of urban development in both developed and developing countries. Among the many things which need to be explained is the continuing high levels of financial investment in property sectors, even well past the time when supply exceeds demand and vacancy rates continue to grow. Various intellectuals have put forward new theories and some situational explanations of the periodic over‐capitalisation in property. The economic adversities are not confined to the property and finance sectors. They extend into the socio‐economic performance of national economies, and in some cases they have international linkages and impacts. Gives exposition and evaluation relating to cyclicity in the USA, the UK, Japan, and some developing countries in Asia. The aim is mainly centred on explanation and theory, extending earlier published work in the authors’ research programmes in property cycles, urban development, and experience in both developing and developed countries. The economic, social, and political significance of property cycles is enormous.

Details

Property Management, vol. 19 no. 4
Type: Research Article
ISSN: 0263-7472

Keywords

Article
Publication date: 28 March 2022

Imanda Luzari Indomo and Arief Wibisono Lubis

The issue of capital structure among property developers in Indonesia becomes interesting as the government speeds up housing development. Examining which theory prevails…

Abstract

Purpose

The issue of capital structure among property developers in Indonesia becomes interesting as the government speeds up housing development. Examining which theory prevails (trade-off versus pecking order) can be done by looking at several determinants of capital structure. This study aims to argue that examining determinants of capital structure in this context should also incorporate business cycles, as the activities of property developers are cyclical.

Design/methodology/approach

Using a total of 183 observations of listed property developers from 2010 to 2019, this study uses the ordinary least squares regression technique. The focus is on determinants of capital structure, which are profitability, tangibility, firm size, ownership and potential growth. The observations are divided into different business cycles (expansion, peak, trough and decline) based on economic growth rates.

Findings

The results show that the natures of relationships between capital structure (leverage) and its determinants are different during distinct business cycles. For example, profitability has a significant and positive effect on leverage during peak, but the signs are negative during trough and decline. Trade-off theory provides a better explanation of property developers’ capital structure behaviour during peak while pecking order theory is more relevant during trough. It is more difficult to conclude which of these theories is superior in expansion and sideways.

Originality/value

There have been limited studies that focus on corporate finance issues of property developers in Indonesia, and no particular attention has been given to the role of business cycles.

Details

Journal of Financial Management of Property and Construction , vol. 28 no. 1
Type: Research Article
ISSN: 1366-4387

Keywords

Article
Publication date: 20 February 2017

Charalambos Pitros and Yusuf Arayici

The study looks at the characteristics of upswings and downswings for UK housing cycles. Specifically, the purpose of this paper is to empirically analyse cycles in house prices…

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Abstract

Purpose

The study looks at the characteristics of upswings and downswings for UK housing cycles. Specifically, the purpose of this paper is to empirically analyse cycles in house prices and housing affordability on the characteristics of persistence, magnitude and severity.

Design/methodology/approach

The paper draws upon the triangular methodology of cycles and utilises housing data from the last three decades.

Findings

From an empirical perspective, the study obtained four main results. First, the graphical trajectory of cycles in house price and housing affordability is highly synchronized. Second, upturns in both cycles tend to be longer than downturns on average. Third, the recent upturn in house prices and housing affordability is characterised by larger duration, magnitude and severity than the earlier case. Fourth, the latest downturn in both cycles is highly synchronised in terms of time occurrence, persistence, magnitude and severity; in addition, in both cases, the latest downturn is considerably smaller than the previous one. The study additionally indicates that on average the length of a complete house price and housing affordability cycle is 19 years on a peak-to-peak basis.

Research limitations/implications

This paper is essentially exploratory and raises a number of questions for further investigation. Future research should, first, arrive at a more nuanced definition of affordability and, second, examine causality. The fact that two phenomena appear to have some significant synchronicity is not an indication that they are interdependent, although logic would suggest they might be.

Originality/value

This is among the few papers that analyses cycles in UK house prices. It is the first study that draws attention to the housing affordability cycle and the first to compare cycles in house prices with cycles in housing affordability.

Details

Property Management, vol. 35 no. 1
Type: Research Article
ISSN: 0263-7472

Keywords

Article
Publication date: 12 June 2019

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 cycles’…

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

Keywords

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