Asia-Pacific Real Estate Research Articles

Short sales, short risk, and return predictability in Asia-Pacific real estate markets

This paper investigates the information content of short sales across Asia-Pacific real estate markets. While the transparent nature of securitized real estate markets within the United States may render short selling activities relatively uninformative with respect to future firm values, such relations have not been broadly explored with respect to the rapidly developing Asia-Pacific region. Within this more informationally opaque market setting, we find evidence that short selling is significantly riskier than shorting in the U.S. Moreover, such risks may well influence investor behavior, as lower levels of shorting are observed across listed Asia-Pacific real estate firms than their U.S. based counterparts. Finally, we also document short sale considerations within this market sector are more informative with respect to future return predictability than similar signals observed for U.S. listed real estate firms. Specifically, increased levels of short interest outstanding, as well as elevated levels of exposure to short sale risk, both exhibit significant (negative) predictive ability over future equity returns. As such, we conclude the relative opacity of international equity markets creates limits to arbitrage, and thereby hinders the efficiency of the price discovery process for listed property companies across the Asia-Pacific region.

SIGNIFICANCE AND PERFORMANCE OF PROPERTY MARKETS IN MALAYSIA

The importance of the global real estate market has been widely debated over the last decade. Prior discussion has focused on various aspects of analysis used to evaluate the performance of the property market, such as statistical analysis, surveys, academic or industrial literature. As a result, it is also necessary to examine the global and Asian property markets while also evaluating the significance and performance of the Malaysian property market in comparison to other Asian markets to determine Malaysia's international contribution to the global property market. The performance of Malaysia's property market from 2015 to 2018 was examined in this study. Data was gathered using Thomson Router Data Stream from Real Capital Analytic, Asia Pacific Real Estate Association (APREA), World Economic Forum, and Transparency International, among others. The study's findings will extend knowledge not only of the performance and significance of the Malaysian property market, but also of GDP growth, inflation rate, market ranking global, competitiveness business environment index, corruption perception, and risk and transparency index in Malaysia and across Asian countries. The overall results indicate that the performance and signs of the Malaysian real estate market were better compared to other Asian and developing markets.

Investor Overconfidence and Trading Activity in the Asia Pacific REIT Markets

Overconfidence is one of the most robust behavioral anomalies in financial markets. By attributing investment gains to their ability, investors become overconfident and trade aggressively in subsequent periods. Evidence from stock markets shows that overconfidence leads to excessive trading and, subsequently, inferior investment performance. However, studies on overconfidence effect are lacking in the real estate sector, which is particularly true for Asia Pacific real estate investment trust (REIT) markets. Thus, this study examines the overconfidence effect in six Asia Pacific REIT markets, namely, Australia, Hong Kong, Japan, Singapore, South Korea, and Taiwan. The study finds that the overconfidence effect is more conspicuous during market boom periods or in inefficient market conditions. In addition, simulation analysis demonstrates that overconfidence could lead to rather large volumes of excessive trading activities in certain markets. Findings are robust across the alternative measures of control variables. Moreover, the policy implications of the research are also discussed.

Make a call: assessing capital calls velocity for closed end Asia Pacific non-listed real estate funds

PurposeThe study examines Asia Pacific (APAC) non-listed non-core real estate funds' capital calls (investor equity drawdowns) sequence for varying vehicle strategies.Design/methodology/approachAnalysis starts with a cursory data interpretation that extracts a typical investors' equity drawdowns schedule. Thousands of simulations are then computed for each vehicle strategy for each year to further interpretation.FindingsData and methodological limitations notwithstanding, overall estimates suggest that funds exhibit a contrasting capital calls sequence. As a group, APAC non-core non-listed real estate funds call circa 76.3% of investors' committed capital during the first four years of the fund life. Single sector, single country and value added vehicles have a greater capital calls velocity compared to their multi sector, multi country and opportunity peers. However, the two fund groups exhibit a notable standard deviation heterogeneity of drawdowns.Practical implicationsInvestors should therefore budget accordingly when choosing either of vehicle strategies to invest in.Originality/valueThe study adds additional evidence on the topic of capital calls velocity. Results should assist LPs with their non-listed APAC real estate funds investment programme further.

2016 Asia Pacific Real Estate Research Symposium Special Issue

2016 Asia Pacific Real Estate Research Symposium Special Issue

Dynamic interdependence between the US and the securitized real estate markets of the Asian-Pacific economies

PurposeThe purpose of this paper is to revisit the dynamic linkages between the US and the national securitized real estate markets of each of the nine Asian-Pacific (APAC) economies in time-frequency domain.Design/methodology/approachWavelet decomposition via multi-resolution analysis is employed as an empirical methodology to consider time-scale issue in studying the dynamic changes of the US–APAC cross-real estate interdependence.FindingsThe strength and direction of return correlation, return exogeneity, shock impulse response, market connectivity and causality interactions change when specific time-scales are involved. The US market correlates with the APAC markets weakly or moderately in the three investment horizons with increasing strength of lead-lag interdependence in the long-run. Moreover, there are shifts in the net total directional volatility connectivity effects at the five scales among the markets.Research limitations/implicationsGiven the focus of the five approaches and associated indicators, the picture that emerges from the empirical results may not completely uniform. However, long-term investors and financial institutions should evaluate the time-scale based dynamics to derive a well-informed portfolio decision.Practical implicationsFuture research is needed to ascertain whether the time-frequency findings can be generalizable to the regional and global context. Additional studies are required to identify the factors that contribute to the changes in the global and regional connectivity across the markets over the three investment horizons.Originality/valueThis study has successfully decomposed the various market linkage indicators into scale-dependent sub-components. As such, market integration in the Asia-Pacific real estate markets is a “multi-scale” phenomenon.

Investor Overconfidence and Trading Activity in the Asia Pacific REIT Markets

Overconfidence is one of the most robust behavioral anomalies in financial markets. By attributing investment gains to their ability, investors become overconfident and trade aggressively in subsequent periods. Evidence from stock markets shows that overconfidence leads to excessive trading and, subsequently, inferior investment performance. However, studies on overconfidence effect are lacking in the real estate sector, which is particularly true for Asia Pacific real estate investment trust (REIT) markets. Thus, this study verifies the overconfidence effect in six Asia Pacific REIT markets, namely, Australia, Hong Kong, Japan, Singapore, South Korea, and Taiwan. The study finds that the overconfidence effect is more conspicuous during market boom periods or in inefficient market conditions. In addition, simulation analysis demonstrates that overconfidence could lead to rather large volumes of excessive trading activities in certain markets. Findings are robust across the alternative measures of control variables. Moreover, the policy implications of the research are also discussed.

The Impacts of Corporate Governance on the Performance of REITs in Singapore

In this paper, we examine the impact of corporate governance on the performance of externally managed real estate investment trusts (REITs) in Singapore (S-REITs) from 2008 to 2012 using the Corporate Governance Index (CGI) developed by the Asia Pacific Real Estate Association (APREA). We employ the generalized method of moments (GMM) method, which is more robust compared to previous studies that used pooled ordinary least squares (OLS) and panel data. The results indicate that corporate governance has a significant impact on return on assets (ROA) and excess returns of S-REITs even though S-REITs are in a highly regulated industry. The results further indicate that individual corporate governance influences and affects the value of S-REITs. In addition, the findings also indicate that the S-REIT board of directors could mitigate and curtail related party transactions, which would have significant impact on the excess returns of S-REITs.

Cross-Border Investment and Firm Liquidity

Executive Summary. We investigate the influence of interjurisdictional, geographic-based information barriers on the financial transparency and liquidity of real estate organizations across the Asia-Pacific region. Given both the unique regulatory distribution requirements across this industry and the capital-intensive nature of most real estate investment activities, firms within this market sector face unique, substantive financing concerns. As a consequence, financial transparency and liquidity are of increased importance to firms within this industry. Consistent with this paradigm, we find strong evidence that Asia-Pacific real estate firms facing enhanced levels of political risk and uncertainty are characterized by higher information barriers, and exhibit reduced financial market liquidity as measured by wider bid-ask spreads.

Asia Pacific Real Estate Research Symposium 2011

The Asia Pacific Real Estate research symposium aims to promote interdisciplinary real estate related research on Asia and the Pacific Rim. It provides a platform for researchers not only to have an active and intensive exchange of research findings but also to strengthen the links between real estate researchers from Asia and other parts of the world. The symposium is co-organized by the National University of Singapore (NUS), the University of Hong Kong (HKU) and Tsinghua University (THU). In this special issue, we have put together 7 papers from the symposiums held in 2011. The 2011 symposium was jointly hosted by the University of Adelaide and National University of Singapore.

Asia Pacific Listed Real Estate: A Contextual Performance Analysis

This paper seeks to provide a better understanding of the performance of listed Asia Pacific real estate, the factors which determine this performance and current and potential roles and applications within portfolio management. Throughout this paper we focus primarily on the Asia Pacific region, that is Asia plus Australia and New Zealand. On occasions, however, for specific reasons we have narrowed the definition to Asia, which will not include Australia and New Zealand. The starting premise of our analysis is as follows: • Asia Pacific listed real estate markets are diverse and present differing levels of maturity • The overall expanding capital markets across the region are providing the depth and liquidity necessary to support increased investor interest in the region • REITs, long established in Australia, have been introduced into other markets in the region and provide another capital option • Market capitalisation of Asian REITs (ex-Australia and New Zealand) now exceeds US$100 billion but REITs represent a minor proportion of the real estate universe • Studies and surveys such as APREA’s The Significance of Real Estate in Asian Pension Funds have highlighted impediments to investing in real estate in Asia, including unfamiliarity with the asset class and lack of information • Global institutional investors tend to view Asian real estate as higher risk and therefore require an appropriate “risk/reward” solution

Capital Structure and Political Risk in Asia-Pacific Real Estate Markets

This study investigates the determinants of capital structure decisions by real estate firms, with a specific focus on the impact of political risk on leverage. Using a sample of Asia-Pacific REITs and listed property trusts, we find those firms with properties located in countries characterized by relatively high degrees of political risk, such as political instability, and/or greater uncertainty in the ability to repatriate and monetize profits from international investment activities, employ less debt than their counterparts operating in more politically stable environments. This core finding remains robust to alternative sample selection criteria including the division of the sample into high versus low market-to-book value firms, and also holds within the subset of organizations that are active in raising additional capital in the secondary markets.

Advisor Choice in Asia-Pacific Property Markets

This paper examines advisor choice decisions by publicly traded REITs and listed property companies in Asia-Pacific real estate markets. Using a sample of 168 firms, we find robust evidence that firms strategically evaluate and compare the increased agency costs associated with external advisement against the potential benefits associated with collocating decision rights with location specific soft information. Our empirical results reveal real estate companies tend to hire external advisors when they invest in countries: 1) that are more economically and politically unstable, 2) whose legal system is based on civil law, 3) where the level of corruption is perceived to be high, and 4) when disclosure is relatively poor. Additionally, we find the probability of retaining an external advisor is directly related to the expected agency costs. Lastly, we find evidence of return premiums in excess of 13 % for firms whose organizational structure matches their investment profile. As such, we conclude that the decision to hire an external advisor represents a value relevant trade-off between the costs and benefits of this organizational arrangement.

Corporate Governance and Performance of Externally Managed Singapore Reits

This paper employs a new scoring framework designed by the Asia Pacific Real Estate Association (APREA) to examine the link between corporate performance and quality of corporate governance among externally managed REITs listed on the Singapore Stock Exchange (S-REITs). The empirical tests provide evidence supporting a positive correlation between corporate governance practices and stock performances. However, we find no positive correlation with operating performance proxied by accounting measures. In other words, S-REITs with higher corporate governance tend to register better risk-adjusted returns but do not outperform operationally. To test for market efficiency, the study shows that S-REITs with the best corporate governance practices also have less information asymmetry.

Long-Term Benefits from Investing in Asia-Pacific Real Estate

This paper analyses long- and short-term co-movements between Asia-Pacific real estate markets and the real estate markets in the U.K. and the U.S. based on bivariate testing for cointegration and correlation analysis. The results indicate that there exist strong long-term relationships between Asia-Pacific real estate markets, while investors located in Asia would benefit from broadening their investment horizon to Australia, Europe, and the U.S. For international investors from the U.S. and the U.K., there exist long-term opportunities to diversify across the Asia-Pacific real estate markets.

The Impact of the Global Financial Crisis on Asia-Pacific Real Estate Markets: Evidence from Korea, Japan, Australia and U.S. REITs

This paper analyzes the impact of the U.S. real estate market collapse on the Asia-Pacific real estate markets, by examining the Korea, Japan, Australia, and U.S. REITs indexes during the sample period of January 2004 - June 2009 with two sub-samples of before-crisis and after-crisis. The findings indicate that linkages between the U.S. and Australia REIT sectors was strong during January 2004 - June 2009. In the case of linkages between the U.S. and Korean REIT sectors, co-movements have become significant only after the breakout of global financial crisis. The Japanese REIT sector shows a weak relationship with the U.S. REIT sector. In addition, this paper shows a weak co-integration among Asia-Pacific REIT sectors. A-REITs, K-CR REITs, J-REITs show different magnitudes of contagion effects. This finding can be explained by characteristics of REITs, structure offinancing, and country's economic situation.

Structural breaks and diversification: The impact of the 1997 Asian financial crisis on the integration of Asia-Pacific real estate markets

Currently, there exists relatively little research on the influence that the 1997 Asian financial crisis has had upon capital flows within the property market and the associated long-run implications of it. This paper examines the impact that the crisis has had upon the integration and dynamic links between a number of Asia-Pacific real estate markets. The results show that Asia-Pacific property markets are integrated, despite a structural shift occurring at the time of the crisis. These results are a particularly important finding for fund managers concerned with the impact of globalization on the performance of their real estate portfolios, showing that in the Asia-Pacific region diversification benefits are actually less than that suggested by an analysis incorrectly ignoring the crisis.

The Dynamics of Long Memory in Return and Volatility for International Real Estate Markets

This study presents an investigation as to whether persistence in international real estate market return and volatility takes the form of long memory using a battery of five econometric tests on total-hedged and public real estate series. For the return series, we find little evidence of long memory, while the empirical results support the hypothesis of long memory for some Asia-Pacific real estate markets. Our additional empirical evidence suggest overall the long memory effect in volatility appears to be real and is less likely to be caused by shifts in variance for some Asia-Pacific real estate markets. Hence these national real estate markets are segmented based on a fractionally integrated structure that is able to provide diversification benefits in international investing.

Errata for: Special issue: institutional analysis of Asia-Pacific real estate markets

Errata for: Special issue: institutional analysis of Asia-Pacific real estate markets

Structural Breaks and Diversification: The Impact of the 1997 Asian Financial Crisis on the Integration of Asia-Pacific Real Estate Markets

Currently, there exists relatively little research on the influence that the 1997 Asian financial crisis has had upon capital flows within the securitized property market and the associated long run implications of it. This paper examines the impact that the crisis has had upon the integration and dynamic links between a number of Asia-Pacific real estate markets. This is achieved through the use of multivariate cointegration analysis that determines and accounts for structural breaks endogenously. The procedures used include those developed by Inoue (1999) and Johansen, Mosconi and Nielsen (2000). The results show that the integration of Asia-Pacific property markets is prevalent despite a structural shift, and that the benefits to securitized real estate diversification maybe far less than originally percieved. These results are a particularly important finding for fund managers concerned with the impact of globalization on the performance of their real estate portfolios.