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1 – 10 of 840Matt Larriva and Peter Linneman
Establishing the strength of a novel variable–mortgage debt as a fraction of US gross domestic product (GDP)–on forecasting capitalisation rates in both the US office and…
Abstract
Purpose
Establishing the strength of a novel variable–mortgage debt as a fraction of US gross domestic product (GDP)–on forecasting capitalisation rates in both the US office and multifamily sectors.
Design/methodology/approach
The authors specify a vector error correction model (VECM) to the data. VECM are used to address the nonstationarity issues of financial variables while maintaining the information embedded in the levels of the data, as opposed to their differences. The cap rate series used are from Green Street Advisors and represent transaction cap rates which avoids the problem of artificial smoothness found in appraisal-based cap rates.
Findings
Using a VECM specified with the novel variable, unemployment and past cap rates contains enough information to produce more robust forecasts than the traditional variables (return expectations and risk premiums). The method is robust both in and out of sample.
Practical implications
This has direct implications for governmental policy, offering a path to real estate price stability and growth through mortgage access–functions largely influenced by the Fed and the quasi-federal agencies Fannie Mae and Freddie Mac. It also offers a timely alternative to interest rate-based forecasting models, which are likely to be less useful as interest rates are to be held low for the foreseeable future.
Originality/value
This study offers a new and highly explanatory variable to the literature while being among the only to model either (1) transactional cap rates (versus appraisal) (2) out-of-sample data (versus in-sample) (3) without the use of the traditional variables thought to be integral to cap rate modelling (return expectations and risk premiums).
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Guido Migliaccio and Andrea De Palma
This study illustrates the economic and financial dynamics of the sector, analysing the evolution of the main ratios of profitability and financial structure of 1,559 Italian real…
Abstract
Purpose
This study illustrates the economic and financial dynamics of the sector, analysing the evolution of the main ratios of profitability and financial structure of 1,559 Italian real estate companies divided into the three macro-regions: North, Centre and South, in the period 2011–2020. In this way, it is also possible to verify the responsiveness to the 2020 pandemic crisis.
Design/methodology/approach
The analysis uses descriptive statistics tools and the ANOVA method of analysis of variance, supplemented by the Tukey–Kramer test, to identify significant differences between the three Italian macro-regions.
Findings
The study shows the increase in profitability after the 2008 crisis, despite its reverberation in the years 2012–2013. The financial structure of companies improved almost everywhere. The pandemic had modest effects on performance.
Research limitations/implications
In the future, other indices should be considered to gain a more comprehensive view. This is a quantitative study based on financial statements data that neglects other important economic and social factors.
Practical implications
Public policies could use this study for better interventions to support the sector. In addition, internal management can compare their company's performance with the industry average to identify possible improvements.
Social implications
The research analyses an economic field that employs a large number of people, especially when considering the construction and real estate services covered by this analysis.
Originality/value
The study contributes to the literature by providing a quantitative analysis of industry dynamics, with comparative information that can be deduced from financial statements over the years.
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Real estate is a capital-intensive industry for which the asset values tend to be highly volatile and uncertain. Transaction costs in the industry are therefore high, and…
Abstract
Purpose
Real estate is a capital-intensive industry for which the asset values tend to be highly volatile and uncertain. Transaction costs in the industry are therefore high, and transparency for investors may be low. The need to signal reliable estimates of property assets, in the communication to external stakeholders, can therefore be expected to be of extra importance in this sector. The purpose of this paper is to investigate how real estate firms use big four auditors to signal quality.
Design/methodology/approach
The authors use Swedish firm level data containing all limited liability real estate companies in the country to determine the determinants of big four auditors. The data set consists of 34,306 observations and is analyzed through logit regressions.
Findings
The results show that big four companies are primarily contracted by large and mature companies, rather than new firms or firms with volatile financial records, although the latter could be expected to have a large need to signal quality. The authors also find that firms listed on the stock market and firms targeting public use real estate are more inclined to use big four companies.
Originality/value
Real estate is a capital-intensive industry for which the asset values tend to be highly volatile and uncertain. Transaction costs in the industry are therefore high, and transparency for investors may be low. The need to signal reliable estimates of property assets, in the communication to external stakeholders, can therefore be expected to be of extra importance in this sector. No prior study of this area has been detected.
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Blockchain, which was originally created to enable peer-to-peer digital payment systems (bitcoin), is considered to have several benefits for different sectors, such as the real…
Abstract
Purpose
Blockchain, which was originally created to enable peer-to-peer digital payment systems (bitcoin), is considered to have several benefits for different sectors, such as the real estate one. In a standard European-wide real estate transaction, several intermediaries are involved. As a consequence, these agreements are usually time-consuming and involve extra difficulties to cross-border operations. As blockchain, combined with smart contracts, may have an important role in these transactions, this paper aims to explore its prospective challenges, limitations and opportunities in the real estate sector and discover how the traditional intermediaries have to face a possible implementation of this technology.
Design/methodology/approach
This paper analyses the current intermediaries in the real estate sector in European Union (EU), their functions and how can blockchain strengthen the security of these transactions while reducing their time. The author uses a legal methodology to approach it.
Findings
Blockchain, combined with smart contracts, has both challenges and opportunities for the real estate sector. On the one hand, it may improve procedures, allow EU transactions and the interconnection between public administration. However, to not reduce parties rights, this blockchain should have some special features, such as the possibility of being amended.
Originality/value
This paper provides a valuable overview of all the intermediaries that could be affected by blockchain protocols. It is of interest of blockchain developers, public administrations and researchers who are working on blockchain and property conveyancing.
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Rickard Engström and Inga-Lill Söderberg
The purpose of this paper is to explore the relationship between formal ethics and ethics in practice in the empirical context of real estate agents (REAs) working in the…
Abstract
Purpose
The purpose of this paper is to explore the relationship between formal ethics and ethics in practice in the empirical context of real estate agents (REAs) working in the residential housing market, including owner-occupied houses and owner-occupied apartments, in Sweden. The paper investigates problems with the Swedish middleman model of real estate agency with regard to the acceptance among REAs of borderline professional behavior.
Design/methodology/approach
We report on a survey distributed to all Swedish licensed residential REAs to investigate their attitudes towards eight scenarios displaying borderline ethical behavior. Firstly, the means of each scenario were calculated, investigating signs of distance between formal ethics and ethics in practice. Secondly, logistic regressions were run for each scenario separately, thereby investigating factors affecting misconduct among REAs.
Findings
The empirical results show a clear difference between formal ethics and ethics in practice and also illustrate that some scenarios of borderline ethical behavior are creating greater problems for the REAs.
Practical implications
In Sweden, the seller is the principal, assigning the REA to sell a house or apartment, but the regulation is clear on the role of the licensed REA as responsible for promoting an informed and fair sales process where the buyer is safe to act without their own representative. Our study contributes with information to policymakers on possible areas for the development of the middleman model.
Originality/value
The paper is the first to empirically investigate the middleman model of a Swedish real estate agency in relation to the business ethics of the agents. The use of scenarios in close relation to the everyday working context of REAs as tests of ethics of practice is also of original methodological value to investigate possible diversions of professionals from national regulations.
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Many studies have analysed the impact of various variables on the ability of companies to raise capital. While most of these studies are sector-agnostic, literature on the effects…
Abstract
Purpose
Many studies have analysed the impact of various variables on the ability of companies to raise capital. While most of these studies are sector-agnostic, literature on the effects of macroeconomic variables on sectors that established over the last 20Â years like property technology and financial technology, is scarce. This study aims to identify macroeconomic factors that influence the ability of both sectors and is extended by real estate variables.
Design/methodology/approach
The impact of macroeconomic and real estate related factors is analysed using multiple linear regression and quantile regression. The sample covers 338 observations for PropTech and 595 for FinTech across 18 European countries and 5 deal types between 2000–2001 with each observation representing the capital invested per year for each deal type and country.
Findings
Besides confirming a significant impact of macroeconomic variables on the amount of capital invested, this study finds that additionally the real estate transaction volume positively impacts PropTech while the real estate yield-bond-gap negatively impacts FinTech.
Practical implications
For PropTech and FinTech companies and their investors it is critical to understand the dynamic with mac-ro variables and also the real estate industry. The direct connection identified in this paper is critical for a holistic understanding of the effects of measurable real estate variables on capital investments into both sectors.
Originality/value
The analysis fills the gap in the literature between variables affecting investment into firms and effects of the real estate industry on the investment activity into PropTech and FinTech.
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Long Yin, Lin Wang, Lifang Huang, Jinxiu Wang, Hui Xu and Milan Deng
The purpose of this paper is to examine how advertising is used by real estate companies as an instrument for managing the adverse effects of a catastrophe.
Abstract
Purpose
The purpose of this paper is to examine how advertising is used by real estate companies as an instrument for managing the adverse effects of a catastrophe.
Design/methodology/approach
Through a theoretical analysis, types of post-disaster advertising messages were identified. On the basis of the likely variations in post-disaster advertising, a content analysis was conducted of a sample of 4,150 property print advertisements to identify advertising messages related to the earthquake. Finally, the message changes in these earthquake-related advertisements were evaluated and compared with the dimension of time to explore the development of advertising strategies.
Findings
The authors found that 12 types of advertising messages were used by developers in response to the Wenchuan earthquake. The initial advertising strategy was mainly to manage public relations, then the strategy was to reduce or compensate for the increased earthquake risk perceptions of buyers.
Practical implications
The findings provide valuable references for helping enterprises adopt effective advertising messages and strategies to reduce the negative effects of disasters.
Originality/value
There are only a few studies on advertising campaigns, especially in the real estate industry, that have been conducted in the wake of catastrophes. This study sought to expand upon the scarce findings in this particular field.
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Jie Meng and Fenghua Wu
As a crucial institutional form established since the Chinese economic reform, the system of competitive local governments has been shaping the characteristics of China's…
Abstract
Purpose
As a crucial institutional form established since the Chinese economic reform, the system of competitive local governments has been shaping the characteristics of China's socialist market economy to a considerable degree.
Design/methodology/approach
This study not only adopts the view of existing studies that attribute the economic motive of local governments to rent and consider land public finance as a means through which local governments carry out strategic investment but also attempts to further develop the view within a Marxist analytical framework.
Findings
As a result, the local governments have helped to maintain an incredibly high investment rate over a considerable period of time, facilitating the continuous, rapid growth of the Chinese economy.
Originality/value
This study concludes that China's local governments function as the productive allocator and user of rent in the strategic investment based on land public finance and thereby embed themselves in the relative surplus-value production initially arising from competition amongst enterprises, forming the dual structure of relative surplus-value production unique to China's economy.
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Alper Ozun, Hasan Murat Ertugrul and Yener Coskun
The purpose of this paper is to introduce an empirical model for house price spillovers between real estate markets. The model is presented by using data from the US-UK and…
Abstract
Purpose
The purpose of this paper is to introduce an empirical model for house price spillovers between real estate markets. The model is presented by using data from the US-UK and London-New York housing markets over a period of 1975Q1-2016Q1 by employing both static and dynamic methodologies.
Design/methodology/approach
The research analyzes long-run static and dynamic spillover elasticity coefficients by employing three methods, namely, autoregressive distributed lag, the fully modified ordinary least square and dynamic ordinary least squares estimator under a Kalman filter approach. The empirical method also investigates dynamic correlation between the house prices by employing the dynamic control correlation method.
Findings
The paper shows how a dynamic spillover pricing analysis can be applied between real estate markets. On the empirical side, the results show that country-level causality in housing prices is running from the USA to UK, whereas city-level causality is running from London to New York. The model outcomes suggest that real estate portfolios involving US and UK assets require a dynamic risk management approach.
Research limitations/implications
One of the findings is that the dynamic conditional correlation between the US and the UK housing prices is broken during the crisis period. The paper does not discuss the reasons for that break, which requires further empirical tests by applying Markov switching regime shifts. The timing of the causality between the house prices is not empirically tested. It can be examined empirically by applying methods such as wavelets.
Practical implications
The authors observed a unidirectional causality from London to New York house prices, which is opposite to the aggregate country-level causality direction. This supports London’s specific power in the real estate markets. London has a leading role in the global urban economies residential housing markets and the behavior of its housing prices has a statistically significant causality impact on the house prices of New York City.
Social implications
The house price co-integration observed in this research at both country and city levels should be interpreted as a continuity of real estate and financial integration in practice.
Originality/value
The paper is the first research which applies a dynamic spillover analysis to examine the causality between housing prices in real estate markets. It also provides a long-term empirical evidence for a dynamic causal relationship for the global housing markets.
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Katarzyna Reyman and Gunther Maier
The purpose of the article is to improve the understanding of the role of institutional factors in real estate development. The authors take into account zoning (existence and…
Abstract
Purpose
The purpose of the article is to improve the understanding of the role of institutional factors in real estate development. The authors take into account zoning (existence and type), type of right of disposal and type of buyer and seller of property in a multivariate econometric estimation. Dependent variable of the analysis is the time between acquisition of empty land and the application for a building permit, a period when many important development decisions have to be made. This indicator is closely related to debated phenomena like land hording and speculation.
Design/methodology/approach
The authors estimate a Cox proportional hazard model with the time between acquisition and application for a building permit as dependent variable and institutional indicators and a number of control variables as explanatory variables. Study area is the GZM Metropolis in the South of Poland. This region shows enough variability in institutional arrangements to allow for this type of analysis.
Findings
The analysis shows that institutional factors significantly influence the real estate development process. In areas that have not issued a zoning plan, the period until the building permit application is significantly longer. When the state is involved in a transaction (as purchaser or seller), it also takes longer until the building permit application is submitted. Although the instrument is usually intended to speed up development, perpetual usufruct implies a longer period until building permit application. Because of the results the authors get for control variables and for robustness checks, the authors are confident of the results of the analysis.
Originality/value
To the authors’ knowledge, this is the first study that deals with the question how institutional factors influence the timing of real estate development. By using data for a region in Poland, the authors also add to knowledge about real estate development in CEE countries.
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