Condominium Market Research Articles

Developers’ leverage, capital market financing, and fire sale externalities✰

Leveraged developers facing rollover risk are more likely to engage in fire sales. Using COVID-19 as a natural experiment, we find evidence of fire sale externalities in the Thai condominium market. Specifically, properties resold by developers with higher leverage ratios are listed at lower prices. This trend is evident for listed developers, who have access to capital market financing, but not for unlisted developers, who primarily rely on bank financing. We attribute this difference to the flexibility offered by bank loan renegotiation as opposed to the rigidity of debt capital market repayments. This observation highlights the pivotal role of commercial banks in financial intermediation, especially in the presence of information asymmetry.

Developers’ Leverage, Capital Market Financing, and Fire Sale Externalities: Evidence from the Thai Condominium Market

Developers’ Leverage, Capital Market Financing, and Fire Sale Externalities: Evidence from the Thai Condominium Market

Using property-level inquiry volume to quantify demand–supply balance for existing houses: the case of the resale condominium market in Tokyo

Purpose Houses are durable, so an imbalance between demand and supply occurs after time has passed since initial construction. The purpose of this study is to quantify the extent of this imbalance for existing houses, focusing on the heterogeneity across property segments. Design/methodology/approach This study uses a unique data set on the “inquiry volume” that each property received from an online real estate portal to measure the volume of demand in relation to supply. Simple regressions are conducted in the resale condominium market across the Tokyo metropolitan area. Findings The inquiry volume successfully tracked a recent expected trend in which demand relative to supply is stronger for condominiums in reasonably priced areas, condominiums in convenient, accessible locations, condominiums built within the last 20 years and compact and spacious units. This study also confirms that these trends cannot be captured through heterogeneity in price levels, which has been widely used in previous studies on measuring housing preferences. Practical implications As an indicator of conditions in the housing market, the property-level inquiry volume has strong potential to provide useful information for supply strategies and for the sustainable use of existing housing stocks. Originality/value The originality of this paper is the use of information on the buyer side, which is typically unobservable.

What is the impact of macroprudential regulations on the Swedish housing market?

Housing shortages and urbanization have led to higher house prices and higher levels of household debt. Sweden's Financial Supervisory Authority has introduced several borrower-based, macroprudential tools to control debt growth over the last ten years. In 2010, a mortgage loan-to-value (LTV) ratio was introduced, and in 2016, the amortization of 1 percent of the loan balance was mandated by law if a mortgage's value was higher than 50 percent of the property value. Furthermore, in 2018, the amortization requirement was tightened, as all households with a mortgage valued at larger than 4.5 times their annual income were forced to be amortized by 1 percent of the loan balance. The question is whether the Financial Supervisory Authority's macroprudential tools have exerted the intended effect. We combine a hedonic regression modeling approach with a regression discontinuity design (RDD) to estimate the causal impact on house prices. The effect of these macroprudential tools is estimated on the single-family housing market and the condominium market. We are using microdata of one million housing transactions between 2008 and 2019. Our estimates indicate that the amortization requirement in 2016 resulted in a negative impact of around 7 percent on housing prices but that a slightly lower impact resulted from the 2018 amortization requirement. The 2010 LTV ratio requirement did not impact the prices of dwellings.

Persistence and Long Memory Behavior in Condominium Prices: Evidence from Major U.S. Metropolitan Areas

This study examines the degree of persistence in the prices, returns, excess returns, and risk-adjusted excess returns in the condominium market for five U.S. metropolitan areas: Boston, Chicago, Los Angeles, New York, and San Francisco, using fractional integration techniques that account for structural breaks and nonlinearity. The results show that the prices, returns, excess returns, and risk-adjusted returns for condominiums across the five metropolitan areas are highly persistent, with orders of integration much greater than one in a vast majority of the cases. Such results challenge the conventional view of market efficiency. The degrees of persistence in West Coast metropolitan areas of Los Angeles and San Francisco are much greater than those of Chicago and the East Coast metropolitan areas of Boston and New York City.

Condominium price dynamics in Sri Lanka: correlation with inflation and periods of concern

ABSTRACT This study conducted in Sri Lanka’s commercial capital – Colombo, investigated temporal variation of condominium prices from 1998 to 2018, to identify price – inflation relationships and periods of concern. The price increased non-linearly with time without abnormal trends. Unit root, cointegration and vector error correction method tests showed inflation can explain temporal variation of semi-luxury condominium’s price appreciation, and it showed a statistically significant (P < 0.01) positive impact in the long run. Price appreciation and inflation showed a weak negative, yet statistically significant impact for luxury condominiums. The impact of inflation on price appreciation in the short run was mostly a negative correlation and as per explanatory powers the impact was minor. It seemed that Sri Lankan condominium market would mostly be without any periods of concern considering the increasing presales and the decreasing price to rental ratios. However, there is a continuous increment of the ratio between the price and household annual income, and it was about 5.25 as at 2018 (price bubbles occurred when this ratio is over six). More studies are recommended specially on future periods of concern and studies that incorporate ultra-luxury apartments being developed by international developers.

The New Frontiers of Housing Financialization in Phnom Penh, Cambodia: The Condominium Boom and the Foreignization of Housing Markets in the Global South

ABSTRACT This article investigates housing financialization processes in low-income countries (LICs). Considering housing as both capital and commodity, the article excavates the roots of housing financialization in LICs since the 1960s, and shows how financialization has been used, since the 1990s, to circumvent long-standing obstacles to the marketization and commodification of LICs’ housing markets. Focusing on the recent development of the condominium market in Phnom Penh, the capital city of Cambodia, the article then investigates the role of various stakeholders (e.g., development agencies, public institutions, foreign and international investors, transnational developers, brokers) in the contemporary financialization of local housing markets. Detailing their strategies, discourses, and actions, I argue that in economic contexts where the financial sector remains underdeveloped, local and international developers and brokers act as agents of financialization by creating specific channels of real estate capital circulation and landing. I argue that the case of Phnom Penh reveals how foreign and transnational stakeholders, mainly originating from Asia, have created a specific regime of capital accumulation through housing financialization, which I name the foreignization of housing markets. This regime emphasizes the significant capacity of financialization to penetrate markets that have long remained out of its reach by establishing capital extraversion mechanisms.

Possibilities and challenges of sustainable condominium development in Thailand: an analysis through the circle of blame concept

ABSTRACT The main objective of this research is to survey the attitudes of project developers, investors, consumers (residents and prospective buyers), and architects involved in the sustainable development of condominium projects. Using the circle of blame concept, qualitative research was conducted by collecting data through structured interviews on sustainability in four areas: environmental, economic, social and community, and aesthetics and functional. Based on the findings, most of the respondents did not renounce the concept of sustainable development if economic sustainability was as expected (such as the project value, rent, return, and cost saving). Thus, it can be concluded economic sustainability is a prerequisite for developing sustainable condominiums. Environmental, social and community, and aesthetics and functional sustainability are the next steps to approach for the project stakeholders. The findings of the research indicate that increased development costs and risks are the key barriers to the success of sustainable development in the Thai condominium market.

The Role of Chonsei as a Price Protector in the Korean Housing Market

ABSTRACTIn this study, we investigate whether ‘Chonsei,’ the distinctive type of housing contract system in Korea, has a favorable impact on house prices during a market downturn. We show the mechanism in which Chonsei prevents a sharp drop in house prices based on sellers’ loss aversion behavior. Moreover, using data on the Seoul condominium (i.e. apartment) market during the 2006–2017 period, we find that Chonsei prices have a negative impact on the housing trade volume in a market recession. This finding is consistent with our argument that loss aversion behavior appears with regard to the rise in Chonsei prices and thereby Chonsei functions as a price protector in the Korean housing market.

Review Article: The Review of Legal Issues Related to the Impacts of Online Vacation Rental Platforms (OVRPs) on Vacation Condominium Rentals and the Hotel Industry in Thailand

This article reviews the impact of Online Vacation Rental Platforms (OVRPs) on vacation condominium rentals and the hotel industry in Thailand and discusses the legal implications of the OVRP use. The literature reviews are providing explanations of Thailand’s laws involving OVRPs and exploring current connections between hotels, vacation condominiums and online rental platforms, using case studies and examples. We find that OVRPs provide short-term rentals in most vacation condominiums at popular tourist destinations in Thailand. According to the Thai Civil and Commercial Code, B.E. 2551, the owners of such properties have the right to lease their property, but rentals of less than 30 days constitute an infringement of the Hotel Act, B.E. 2547. Case studies from other countries suggest that OVRPs may have positive as well as negative impacts on the hotel industry, and may also generate indirect benefits for other industries such as tourism and real estate development. Increasingly, vacation condominiums in Thailand are attracting individual investors, many of them foreigners, for the short-term rental market via OVRPs. This development not only undermines the Hotel Act, B.E. 2547 but also poses various risks for hosts, guests, co-owners and potential condominium buyers – risks which are not currently addressed by applicable Thai law. Areas identified as requiring further research regarding the impacts and legal implications of OVRPs in Thailand include: (i) balance of positive and negative impacts of OVRPs on Thai economy and society; (ii) impacts of OVRPs on the vacation condominium market in Thailand; and (iii) merits of amending the legal issues to cover the OVRPs rentals.

Research for the Creation of a Quality Certification System from Warehouse Business Park in Brazil

The Logistic Condominium market developed starting from quality parameters established when the demand for logistics and industrial facilities began to gain space in Brazil, becoming the target of real estate ventures. That was the start of the operations of this real estate market niche, where Logistic warehouse project developers intended to meet the demands of companies seeking a solution for their operations in facilities located in strategic flow points, enabling them to achieve efficiency with quality. Investors or potential Logistic condominium users should have looked at the alternatives to choose the one fitting the demands and routines of the market and / or their needs. From the existing demands in warehouses sector, this article, based on criteria arbitrated by the market and in academic publications, explains the methodology for the creation of a Warehouses Business Park classification system in Brazil from an attribute matrix modeled on a research questionnaire and applied to experts of the mentioned market. A process for creating a methodology criteria to support decision-making through a rigorous recognition of quality, impartial and embedded in national policies was systematized by developing the Delphi technique.

Determinants of Market Value for Condominium Properties: Case Study in Dehiwala, Colombo.

Sri Lanka is one of the fastest growing economies in Asia. In this growing environment, the real estate market has shown a significant growth, with an increase in price levels of real estate assets. The high value segments in this market are luxury apartments and condominium sector. Condominium market shows a significant extend over the past two to three years. Urbanization, land shortage are the main reasons for the increased demand of the condominiums, particularly in the Western Province. When compared to value of real properties, condominiums have higher market value than other real properties. To monitor the condominium market, the first issue is to understand what are the determinants of market value for the condominium properties. There are number of factors affecting the market value of condominiums. Based on these factors market value will be changed from one property to another property. Property market buyers and sellers are highly depending on these factors, when buying and selling condominium units. Therefore, it is important to identify current condominium property market and factors affecting market value of condominiums. This research conducting based on Dehiwala Mount Lavinia Municipal Council Area. Participants in this survey were condominium housing unit owners in selected case study area. From 650 condominium units, 120 units are randomly selected. Findings of this study highly depend on primary data and it collected from the Structured Questionnaires and Field Visits. Each participant was given a questionnaire which contains demographic information and determinants of market value of condominium properties. Determining criteria divided in to 5 major categories and respondents are select one item from 5-point scale ranging from strongly agree to (1) strongly disagree (5). The data analysis of the study is presented descriptively. Location is the most significant factor to determine the market value of condominium properties. In additionally, Neighborhood and Community factors are highly affecting to determine the market value of condominium properties.

Book Reviews

Benjamin Williams of George Washington University reviews “Structural Econometric Models”, by Eugene Choo and Matthew Shum. The Econlit abstract of this book begins: “Twelve papers explore recent developments in the use of structural econometric models in empirical economics. Papers discuss Euler equations for the estimation of dynamic discrete choice structural models; approximating high-dimensional dynamic models—sieve value function iteration; identifying dynamic games with serially correlated unobservables; partial identification in two-sided matching models; identification of matching complementarities—a geometric viewpoint; comparative static and computational methods for an empirical one-to-one transferable utility matching model; a test for monotone comparative statics; estimating supermodular games using rationalizable strategies; estimation of the loan spread equation with endogenous bank-firm matching; the collective marriage matching model— identification, estimation, and testing; deflation in durable goods markets—an empirical model of the Tokyo condominium market; and a dynamic analysis of the U.S. cigarette market and antismoking policies. Choo is with the Department of Economics at the University of Calgary. Shum is with the Division of Humanities and Social Sciences at the California Institute of Technology.”

Cointegration of matched home purchases and rental price indexes — Evidence from Singapore

This paper exploits the homogeneity feature of the Singapore private residential condominium market and constructs matched home purchase price and rental price series using the repeated sales method. These matched series allow us to conduct time series analysis to examine the long-term present value relationship in the housing market. Three key findings are obtained. First, we fail to establish a cointegrating relationship between the home purchase price and rental price based on nationally estimated indexes. Second, area-specific indexes demonstrate strong cross-correlations, invalidating the use of first generation panel unit root tests that ignore these cross-correlations. Third, Pesaran's CIPS test indicates that the unit root hypothesis is rejected for the first difference of both indexes. We also do not reject the hypothesis that area-specific home purchases and rental price indexes are cointegrated with a cointegrating vector (1, −1).

Cointegration of Matched Home Purchases and Rental Price Indexes -- Evidence from Singapore

This paper exploits the homogeneity feature of the Singapore private residential condominium market and constructs matched home purchase price and rental price series using the repeated sales method. These matched series allow us to conduct time series analysis to examine the long-term present value relationship in the housing market. Three key findings are obtained. First, we fail to establish a cointegrating relationship between the home purchase price and rental price based on nationally estimated indexes. Second, area-specific indexes demonstrate strong cross-correlations, invalidating the use of first generation panel unit root tests that ignore these cross-correlations. Third, Pesaran’s CIPS test indicates that the unit root hypothesis is rejected for the first difference of both indexes. We also do not reject the hypothesis that area-specific home purchases and rental price indexes are cointegrated with a cointegrating vector (1,-1).

Dynamic pricing in the Singapore condominium market

Dynamic pricing strategies are likely an important consideration of Singapore condominium developers because of the durability of condominiums, price transparency, and the long sales period. While we do not observe any systematic relationship between the new sale prices and time of purchase, we do find that quality-adjusted price increases and the quality of units purchased decreases over the new sale period. These results suggest that condominium developers allow early buyers to purchase high quality units at discounted prices but do not extend the price discount to later buyers of low quality units.

Dynamic Pricing in the Singapore Condominium Market

Dynamic pricing strategies are likely an important consideration of Singapore condominium developers because of the durability of condominiums, price transparency, and the long sales periods. While we do not observe any systematic relationship between new sales prices and time of purchase, we do find that quality-adjusted price increases and the quality of units purchased decreases over the new sales period. These results suggest that condominium developers allow early buyers to purchase high quality units at discounted prices but do not extend the price discount to later buyers of low quality units.

Sustainable Measures and Economic Value in Green Housing

As interest grows in environmentally friendly buildings, or “green buildings,” the real estate industry is expected to play an increasingly active role in the realization of a low-carbon society. Various efforts toward such a society are currently being promoted vigorously within an international framework. To supply a socially desirable level of green buildings via the market mechanism, the economic value of green buildings (as measured by the market) must be commensurate with the required investment. Many remain sceptical, however, about the true economic value of green buildings. A thorough analysis has yet to be conducted to evaluate whether green buildings realize income increases commensurate with the enormous initial investments required, although it is clear that cost savings do result from lower energy consumption. This paper shows through a series of analyses that certain market conditions must be in place in order for green buildings to produce economic value. Specifically, it used the hedonic approach to clarify whether or not there is added economic value, focusing on the new condominium market in the Tokyo metropolitan area. Based on a demonstration analysis of the housing market, the author shows that new condominiums with “green labels” using “sustainable measures” command a premium of approximately 5.8% in asking prices and 4.7% in transaction prices.

The value of a floor: valuing floor level in high‐rise condominiums in San Diego

PurposeThis paper aims to analyze the effect of floor level on condominium prices in San Diego, California. The authors determine whether “higher‐floor premiums” exist in the condominium market for a large California city. Further, they investigate how the floor premium varies throughout a building, particularly whether it is quadratic and whether there is a “penthouse premium” for top‐floor units.Design/methodology/approachThe paper utilizes a data set of 2,395 condominium sales occurring in San Diego between 2006 and the second quarter of 2011. Using hedonic pricing analysis, the authors model the housing price as a function of condominium, building and neighborhood characteristics.FindingsThe results suggest that there is a higher‐floor premium for condominiums in San Diego. Specifically, an increase in the floor level is associated with about a 2.2 percent increase in sale price. The higher‐floor premium appears to be quadratic in price, suggesting that price increases at a decreasing rate above the mean floor level. The authors also find evidence for a penthouse premium, though this effect disappears once “floor” is controlled for in the model.Originality/valueThere has been little direct research on the floor effect in condominium prices. The studies that have used floor level as an explanatory variable have been predominately in Southeast Asia. The results suggest that the floor effect is more complex than previously modeled.

既存分譲集合住宅 (中古マンション) 市場における流通特性と需要特性

既存分譲集合住宅 (中古マンション) 市場における流通特性と需要特性