Abstract
Abstract The residential real estate market is thought to show a tendency for wide fluctuations in prices, as a result of which price bubbles appear. This element of risk has a direct bearing on investors interested in speculation and those seeking to meet their housing needs. Wide fluctuations in the values of real estate affect the investors’ financial situation in many ways, by determining the possibility of meeting one’s housing needs, reducing or sometimes raising creditworthiness, and by increasing investment risk measured by volatility. Omitting the obvious social dimension of the residential real estate market and concentrating on its financial aspects, the author of the article analyses to what degree wide swings in prices can be recognized as specific to this market. To this end, the volatility of prices in the stock market and in the secondary housing market in Poland is compared. An analysis is performed to establish which of them has higher average volatility measures or rates of return, i.e. which of them is more profitable or secure for investors. Statistical tests are used to find out whether average rates of return or measures of risk are equal or different between the two markets. The results of the research show that the secondary housing market and the stock market differ concerning cumulative average rates of return and standard deviations. In the first of them, they are respectively higher and lower.
Highlights
Investors may choose from a range of investment options, but their decisions determine future rates of return
Long-term investments are typical of the real estate market, whereas the stock market offers investments of various maturities
The research was inspired by the opinions of some researchers, according to whom dynamic changes in prices in the real estate market, especially in the housing market, make it susceptible to price bubbles and, REAL ESTATE MANAGEMENT AND VALUATION
Summary
Investors may choose from a range of investment options, but their decisions determine future rates of return. The author assumed for the purposes of this article that the obstacles investors face were not a serious problem for them and so they could freely invest their resources. This assumption is unrealistic for most investors, but some of them can certainly afford investments big enough to allow them to ignore various limitations. Long-term investments are typical of the real estate market, whereas the stock market offers investments of various maturities. The question that must be asked in this context is about which of the two markets – the secondary housing market or the dynamic stock market – is safer for investors. The hypothesis formulated for the research was that the secondary housing market was a safer alternative
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