Research Papers presented at recent Academic Conferences

25th European Real Estate Society (ERES) Meeting, Reading UK, 27th - 30th June 2018

Presented Papers:

Paper 1: The use of listed real estate in Real Asset Funds

Author: Alex Moss

The purpose of this paper is to examine the impact of combining listed real estate securities with infrastructure and real asset allocations. The study looks at how the time variant the results are, as well as the extent of regional variations. Following on from the academic evidence, the paper examines the practical applications of this strategy.

Paper 2: The Performance of REITs in Advancing and Declining Markets Revisited

Author: Stephen Lee

The purpose of this paper is to examine the risk-adjusted performance of Equity Real Estate Investment Trusts (EREITs) and Mortgage REITs (MREITs) in advancing (bull) and declining (bear) markets.  Fabozzi and Francis (1977) stress however that no one definition of advancing (bull) and declining (bear) exists therefore we use a number of different definitions.  The empirical findings show that the risk-adjusted performance EREITs and MREITs differs in the phases of the market.  Conclusions that continue to hold under the alternative definitions of advancing and declining markets.  Although, advancing and declining markets were evaluated ex-post, the finding that the risk-adjusted performance of EREITs and MREITs perform differently in different phases of the market is of significant importance for the decision-making of portfolio management.

Paper 3: The joint dynamics of European office yields

Author: Sotiris Tsolacos, Yi Wu and Samuel Duah

We examine office yield behaviour in key European cities which account for the bulk of investment transactions in Europe. A number of studies investigate the cross sectional influences on real estate yields identifying factors which drive the geographical variation of yields. These studies also highlight global factors driving yields in addition to geography specific influences. Research work using time-series data ascertain the impact of dynamic drivers of yields such as the business cycle and yields in alternative asset classes. This study examines the response of yields to dynamic influences that reflect changing macroeconomic and investment conditions. We explicitly examine the relevance of investor sentiment in yield movements by including both direct and indirect measures. The empirical investigation extends to include the flight-to-quality/liquidity phenomenon in bond and real estate markets. We pool the Prime European office yield data provided by BNP Paribas for 22 cities during period of 2003 to 2017 and opt for a fixed effect panel regression model and Pooled Mean Group estimation. We found that government bond yield and economic sentiment highly significant on office yield. But European prime office yields not as sensitive to interest rates and GDP growth. Furthermore, we found that the low sensitivity to rent growth which is consistent with existing studies. The PMG results show that the government bond yields will only have a measured effect on prime offices even in the long-run.

Paper 4: Could Airbnb in Hong Kong be responsible for higher housing rents in Hong Kong?

Author: Sotiris Tsolacos and Ervi Liusman

The growth of sharing platform of Airbnb, one of the pioneers of the share economy, allows suppliers to supply underutilized short-term accommodation. At the demand side, consumers eagerly welcome these services due to fee sharing benefit. Since its introduction in 2008, more than 50 million guests has utilized its service. Its growth in fact has brought disruption to the hotel industry, particularly those targeting budget customers and non-business travellers. In this paper, we use Hong Kong as our case to empirically test whether Airbnb is responsible for higher housing rents. We hypothesize that the impact of Airbnb may not be of significance in Hong Kong the result of a small market for short-term rental as opposed to the market for long-term rental. There is an actual strong demand from local residents to occupy the space rather than lease it to non-residents tourists. We use hedonic framework in which rents are examined with reference to key housing characteristics and Airbnb rentals. This analysis provides the initial steps for a fuller treatment of the impact of Airbnb on residential rents in Hong Kong and makes direct contributions to the relevant international literature. This analysis contributes to a fuller treatment of the impact of Airbnb on residential rents in Hong Kong.

Paper 5: Media and Foreign Institutional Ownership of European REITs

Author: .Yi Wu

Institutional real estate investors commonly invest in real estate via investments in publicly traded real estate investment trusts (REITs). Recently, the increasing flow of investment from international investors into REITs sector come from foreign institutional investors. The wave of news from media has largely changed the structure of investors' information, which affect investors investment preferences (Ron and Robert 2017). This paper aims to investigate whether foreign investors rely more on home media (than domestic media) to make their foreign investment decisions. Furthermore, institutional investors hold large ownership stakes in European REITs. The traditional view is that institutions are both long-term and passive investors (Devos et al.2013), so the institutional investors tend to find out the more efficient information. Most literature suggests that media coverage reduces the information asymmetry in financial markets (Bushee et al. 2010; Blankespoor et al. 2014) and plays a corporate governance role (Dyck et al. 2010; Dai et al. 2015). However, it is not clear whether the domestic and foreign media play a different role in providing information to foreign investors in European REITs. This paper aims to resolve the puzzle by answering that whether higher media coverage from a particular foreign country is expected to increase European REITs' foreign ownership from that country or not. I investigate this relationship over the period from 2000 to 2017 by matching the second-rate media news with the yearly European REITs ownership data. This paper highlights the different sources of media news impact on foreign institutional investors' ownership of European REITs, which provides important implications for European REITs managers.

Paper 6: Exploring issues in calculating robust estimates for discount rates of leasehold relativities within Central London

Author: Mark Andrew and James Culley

Recent tribunal decisions upon the use of hedonic models for assessing the extent of the price impact on dwellings due to the length of unexpired lease term have pushed the topic into the spotlight once again. A major focus of this study will be testing the robustness of the lease dummy approach, as this is the method currently finding itself increasingly adopted/accepted in the industry in explaining relativities. Within this analysis we will examine whether the differing geographical constraints of sample properties that constitute traditional graphs of relativity could lead to the differing levels of relativities produced by those graphs. Our study will cover issues that we have found on data quality, model constraints and the impact of factors such as alternate methods of incorporating locational constraints have on the calculation of leasehold enfranchisement relativities within the London residential market.

2018 Asian Real Estate Society Annual International Conference, July 8-11, 2018, Incheon , Korea

Panel: Global Infrastructure Investing.
The panel took a global view on infrastructure investing. Useful comparisons were made on the need for infrastructure across continents revealing a significant infrastructure gap. Types of infrastructure, methods of funding and public-private sector engagement were discussed. The panel extended discussion on the risk-return profile of these investments and international experience was shared.

Paper 1: The role of emotion in a housing purchase: An empirical analysis of the anatomy of satisfaction from off-plan apartment purchases in France

Author. Mark Andrew and Fabrice Larceneux

This paper examines empirically the role of an emotion of owning a new build apartment, derived from its representation through mental imaging (‘visualization’) from marketing techniques, in influencing off-plan purchases in France, and how its effect on satisfaction evaluations of the apartment purchased affects buyer ratings of developer performance. Through structural equation modelling we show that psychological measures of perceptions influence buying decisions via satisfaction of the apartment purchased. Buyer evaluations are cognitively dominated by the assessment of utilitarian benefits but emotion plays a significant role among homebuyers as well as investors. Our analysis also sheds light on how buyer satisfaction could potentially augment the reputation of a developer to achieve off-plan sales targets.