Demand For Real Estate Research Articles

Real Estate and Construction Sector Dynamics Over the Business Cycle

This paper explores the property prices and investment dynamics over the business cycle when there is competition between households and firms for real estate. We introduce a construction sector into an RBC framework, which uses land, capital and labour to produce both commercial and residential real estate. This market structure activates a real estate substitution channel, where an increase in demand for residential real estate also increases the cost of producing commercial structures, which crowds out commercial real estate investment. In general, we find that the residential/commercial land allocation acts as an anchor for the allocation of its real estate investment counterpart; however, there are notable separations, particularly following the financial crisis where there was a simultaneous fall in residential and commercial investment. Our results indicate that whilst residential real estate prices were predominately driven by increases in its demand in the buildup to the financial crisis, the fall in demand for commercial real estate played a significant role in generating price falls for both types of real estate in the aftermath. Furthermore, falls in the overall supply of real estate played an important role in reducing real estate investment which put upward pressure on prices throughout the past two decades.

Approach to Prioritizing the Commercial Real Estate Development Risk

After 30 years of war in Sri Lanka, the demand for real estate has increased tremendously across the nation. Similarly, numerous real estate sub-sectors have avidly participated in the worldwide boom. However, with failures and poor functioning of many investment projects, the industry's risk management reputation has been put in jeopardy, followed by the coronavirus (COVID-19). Though it is less popular among Sri Lankan property developers, risk management strategies in development projects have become a pressing requirement. This paper's goal is to look at commercial property development risk elements from the perspective of a real estate developer in relation to Social, Economic, Environmental, Technological, Political, and Pandemic Risks. The research first evaluates risk variables using a super decision software model based on the Analytic Hierarchy Process (AHP), then prioritizes the most important risk factors, and lastly examines effective risk management measures for successful real estate developments. The data collection has been carried out using interviews through telephone conversations with the help of a structured questionnaire. Accordingly, 35 risk factors have been assessed altogether. For the three projects, the synthesized values were 1.0000, 0.510763, and 0.604037, respectively. Based on the analysis of superMatrix calculation, project A is regarded as the best alternative project in such circumstances. Pandemic Risk, Economic Risk, and Political Risk have all had a significant impact on the primary risk criteria. Therefore, COVID-19 Pandemic Risk Emergence, Workforce Availability, Duration, Delays in Council Approval/License Approval Process and Natural Disaster Impact were identified as the highest influenced sub-risk factors. Identifying the risk factors on this avenue will also help in making better investment decisions while increasing the unpredictable nature of the real estate field and future satisfaction of loan team investment goals within the country.

THE IMPACT OF FINANCIAL STABILIZATION POLICIES ON THE LEVEL OF NON-PERFORMING LOANS: PROBLEMS AND CONTRADICTIONS (THE CASE OF CYPRUS)

The relevance of the article stems from the current level of non-performing loans (NPLs), which remain very high and pose risks of financial instability in Cyprus. Further reducing the high level of NPLs is one of the main strategic objectives of the Cyprus Stability Program for the period 2019-2022. The purpose of this paper is to identify problems and contradictions in the current financial stabilization policy in the banking sector of Cyprus and to help policy makers of financial policy to trace the problems and contradictions in the course of its implementation. The object of the study is the financial and, in particular, the banking sector of Cyprus, which is largely concentrated within the two systemic banks. The methodology of the study is based on theoretical and methodological analysis of the scientific literature, statistical method, observations, comparative method and analysis, as well as analytical and comparative graphs, comparative and analytical approaches. The results of this study show that the profitability of the banking sector of Cyprus is still negatively affected by a long period of low interest rates, as well as the burden of increasing provisions for bad debts. The adoption of the accounting standard (IFRS9) will lead to a further increase in the amount of provisions for impaired loans and thus have a negative impact on the profitability of banks. In addition, the decrease in the loan-to-deposit ratio was mainly due to a significant reduction in the loan portfolio of Cypriot banks. The significant decline in total lending by banks is due to the high level of non-performing loans in Cyprus, accounting for 31.8% of total loans at the end of November 2018. Moreover, about half of all NPLs are NPLs of households. The ESTIA program was created to address NPLs in Cyprus. Overall, the results of the study also show that the launch of the ESTIA program in 2019 will lead to an increase in moral hazard. Significant growth in demand for real estate in Cyprus is due to government policy and is carried out through the Citizenship for Investment program. Increased demand causes prices to rise and forms a bubble in the real estate market. In turn, the formation of a housing price bubble is one of the pre-crisis conditions.

USING SVR AND MRA METHODS FOR REAL ESTATE VALUATION IN THE SMART CITIES

Abstract. Determination of real estate value plays a very critical role in economic development and basic needs of people. Increasing demand for real estate together with population growth is making it difficult to determine real estate value. In applications where real estate is the main subject, such as urban activities, smart cities and urbanization, urban information system and valuation systems, model-based value estimations are essential for effective land/real estate policy. The type of real estate and impact degree of features depending on the type should be known as well as value estimation. It will be beneficial to follow a method that both determines the real estate value and factor impact degree. With the studies to be carried out using such methods, both region-specific valuation models can be created and the model is established with the optimum variable. This paper aimed to determine real estate value by using Support Vector Regression (SVR) and Multi Regression Analysis (MRA) methods for effective real estate management. Besides, both methods were examined by revealing the impact degrees of features that affect the value. The methods were applied to 319 parcels in Konya. For each parcel, 31 land features and market values were collected. The parcel data collected since 2018 were included in the models. From the results, the RBF-SVR model reached the highest R2 value with 0.88, while the MRA model reached 0.86.

Long lease real estate – a revised role for real estate in pension fund portfolios

PurposeLong lease real estate funds (over £15bn in Q3 2020) have emerged as an increasingly important part of UK pension fund real estate portfolios. This paper explores the reasons for their dramatic growth, their characteristics and performance.Design/methodology/approachThis study uses data for the period 2004–2020 collected directly from fund managers and from AREF/MSCI and empirical analysis to explore their characteristics and performance.FindingsPension fund de-risking and regulatory guidance have supported the dramatic growth of long lease real estate funds. Long lease real estate funds have delivered strong risk-adjusted returns relative to both balanced property funds (with shorter lease terms) and the wider property market. This relative performance has been particularly strong when wider property market performance has been weak. Long lease funds have objectives aligned with liability matching and their performance suggests they are lower risk (more bond-like) investments. In addition, our analysis highlights they are far less responsive to the wider property market than balanced funds. However, they are not significantly different from balanced property funds in terms of their short-term relationship with gilt yield movements.Practical implicationsFor pension funds and other investors the paper highlights that long lease real estate funds offer a different exposure than balanced property funds. Long lease funds have objectives more closely aligned to the overall objectives for pension fund investment but are not significantly more reliable than balanced property funds in the short-term as a liability hedge. For real estate fund managers, occupiers, developers and others active in the real estate market, the paper highlights why these funds have been (and are likely to remain) attractive to investors leading to substantial demand for long lease real estate investments.Originality/valueThis is the first study to review this increasingly important part of the UK real estate fund universe.

Investment Decisions in Real Estate: A Study in Kolkata

Real Estate is being one of the flourishing sectors of the Indian Economy is expected to contribute around 13 per cent of the country’s GDP by 2025. The rapid globalization is accelerating the demand of real estate for residence and office space. The particular study is confined mainly to residential units. The main focus of the study is to analyze the factors that influence the real estate investment decision and also to find out the influence of demographic variables on the investment decisions of the real estate. For the purpose of the study 115 respondents were selected from Kolkata.

Investigating the Impact of Firm Specific Determinants of Non-Pension Fund on Property Investment Decisions: An Evidence from Zanzibar Social Security Fund in Tanzania

The aim of this study was to look at the impact of firm specific determinants of non-pension fund on property investment decisions, a case study of Zanzibar Social Security Fund (ZSSF) in Tanzania. The unit root test, co-integration, and vector error correction model (VECM) were used for estimation in the linear econometric model equation, which looked at the impact of three firm specific determinants of non-pension fund on property investment decisions: urbanization (URB), inflation rate (INF) and interest rate (IR). The estimated result showed that, there was presence of long-run relationship at equilibrium between property investment decisions (PID) in ZSSF and all tested determinants of property investment decisions. The results revealed that urbanization (URB) had positive significant long run relationship with property investment decisions in ZSSF. But it was further revealed that the inflation rate (INF) and interest rate (IR) had negative relationship with PID at ZSSF, though they were statistically significant. The results also revealed unidirectional causality relationship whereby PID causes IR. Furthermore, the results revealed unidirectional causal relationship from URB to PID at 5% level of significant. However, the result revealed that PID and INF were not granger cause each other in a short run. The study then recommends among others, that management of ZSSF has to consider these determinants when they make property investment decisions, this including, the need for management of Zanzibar Social Security Fund to work together with financial institutions like banks to develop a working formula on how they can facilitate mortgage facility at reasonable rate for residential and commercial properties, this will help to increase demand for real estate to society.

Strategic asset allocation and the demand for real estate: international evidence

Strategic asset allocation and the demand for real estate: international evidence

Value Maximizing Decisions in the Real Estate Market: Real Options Valuation Approach

The real estate market of EU countries has undergone a severe global financial crisis 2008–2009, recovered successfully later, and now experiencing significant uncertainty due to the COVID-19 pandemic event. Significant volatility of the real estate business is once again evident, just as it was following the global financial crisis. The paper aims to provide a case study of a real estate project by giving insight into the Latvian real estate project that had been experiencing similar economic uncertainty, to demonstrate hybrid real options valuation (ROV) method to adapt real estate investments to changing circumstances and to develop the decision-making solution to similar EU real estate problems during the pandemic. The paper provides the “step-by-step” ROV application’s methodology in real estate development projects. The presented methodology is a powerful managerial risk management tool for the executives of similar real estate development projects in the EU countries struggling to make investment decisions in the pandemic and post-pandemic period. Since any estimation includes assumptions, ROV results should be interpreted and perceived as approximations only. The future works can provide robust ROV analyses and interpretations regarding the demand for real estate, showing quantitatively how competition can impact strategic investment decisions.

Real Estate and Construction Sector Dynamics Over the Business Cycle

This paper explores the property prices and investment dynamics over the business cycle when there is competition between households and firms for real estate. We introduce a construction sector into an RBC framework, which uses land, capital and labour to produce both commercial and residential real estate. This market structure activates a real estate substitution channel, where an increase in demand for residential real estate also increases the cost of producing commercial structures, which crowds out commercial real estate investment. In general, we find that the residential/commercial land allocation acts as an anchor for the allocation of its real estate investment counterpart; however, there are notable separations, particularly following the financial crisis where there was a simultaneous fall in residential and commercial investment. Our results indicate that whilst residential real estate prices were predominately driven by increases in its demand in the buildup to the financial crisis, the fall in demand for commercial real estate played a significant role in generating price falls for both types of real estate in the aftermath. Furthermore, falls in the overall supply of real estate played an important role in reducing real estate investment which put upward pressure on prices throughout the past two decades.

Mutation of the Seaside Architecture in Algeria and its Impact on Coastal Landspace. A Case Study: Ain El Turc, Algeria

The sea strongly contributes to the identity of coastline areas. Moreover, it has been demonstrated that the coastline is a geographical entity which calls for specific organization. From an architectural point of view, design elements have been associated with the assets (or constraints) of the site. Thus, the view is associated with the bow window, protection against the climate with canopies and protruding roofs, and quality of the soil and bedrock. Integration into the site is also highly desirable, both in form (ship) and in construction materials. The urbanization of coastal areas in Algeria is a colonial fact. In pre-colonial times, little importance was given to these areas, whereas later they became a priority: port sites, the speed of communications with Europe, rich agricultural plains, a mild climate and welcoming beaches. The developments and seaside constructions carried out during this period were part of the logic of attractiveness to welcome more European settlers and promote the sedentarization and growth of those already living in Algeria. After independence, political and economic choices did not unfortunately take into account the geographical and climatic specificity of Algeria’s coastal zones. Thus, population growth and rural depopulation have led to a sharp increase in the demand for real estate, which has resulted in unbridled urbanization, regardless of the seaside vocation of these territories. In this article, based on the case of the seaside resort of Ain El Turc, which has colonial architectural production of an exceptional quality that takes into account the specificities of the coastline and the presence of the sea, the aim is to assess and verify if this architecture was perpetuated after independence. To this end, we have highlighted, through bibliographic research, the characteristics of seaside architecture from the 19th and 20th centuries and those of the contemporary time. An analysis of all the dwellings located in the Saint Rock district in the municipality of Ain El Turc consisted in identifying these characteristics and establishing a classification of these constructions.

Author’s factor analysis of financial dependence of the Russian construction industry

Construction is one of the fastest growing and developing business sectors. This is due to the fact that the construction market is almost always in high demand, which is growing every day. Especially profitable is construction in large cities, whose population is constantly increasing due to the influx of new residents from the regions seeking to earn money in large cities. Currently, the construction market in the Russian Federation has opposite trends. The first is the deterioration of the economic condition of citizens, which leads to a decrease in demand. The second is financial instability and fluctuations in the ruble exchange rate, as a result of which people try to save their earned money and invest it in real estate, and this, consequently, leads to an increase in demand for real estate. The article analyzes the model of financial dependence. The article describes 10 methods of factor analysis developed by Filatov E. A., which make it possible to draw an accessible and relatively simple conclusion about changes in the resultant indicator. The object of research of the article is the construction industry of the Russian Federation in the context of three main types of construction: construction of buildings; construction of engineering structures; specialized construction works.

Foreign demand and high-rise luxury housing projects in two Turkish cities: Ankara and Trabzon

In recent years, Turkey has experienced a drastic increase in transnational migration, especially from Middle Eastern countries, and consequently, there has been a significant rise in foreign demand for Turkish property. After the 2000s, new arrangements in the Land Registry Law eased the acquisition of the real estate by foreigners, and the ensuing rise in demand for real estate had a significant effect on the Turkish housing sector. Turkish cities have seen a significant rise in the development of high-rise residential communities in recent years, some of which aim to attract foreign investors. This study investigates the relationship between the emergence of high-rise luxury housing projects and the rising demand for homes by foreigners focusing on two case study cities: Ankara and Trabzon. Both cities face the pressure of high-rise residential development and the foreign demand for real estate but under different circumstances.

The Donut Effect of COVID-19 on Cities

Using data from the US Postal Service and Zillow, we quantify the effect of Covid- 19 on migration patterns and real estate markets within and across US cities. We find two key results. First, within large US cities, households and businesses have moved from the dense central business districts (CBDs) towards lower density suburban zip-codes. We label this the “Donut Effect” reflecting the movement of activity out of city centers to the suburban ring. Second, while this observed reallocation occurs within cities, we do not see major reallocation across cities. That is, there is less evidence for large-scale movement of activity from large US cities to smaller regional cities or towns. We rationalize these findings by noting that working patterns post pandemic will be primarily hybrid, with workers commuting to their business premises typically 3 days per week. This level of commuting is less than pre-pandemic, making suburbs relatively more popular, but too frequent to allow employees to leave the cities containing their employer.

ИНВЕСТИЦИОННО-КРЕДИТНЫЙ МЕХАНИЗМ ИПОТЕЧНОГО КРЕДИТОВАНИЯ КОММЕРЧЕСКОЙ НЕДВИЖИМОСТИ

Consumer demand for commercial real estate currently remains low due to both low incomes of the population and the lack of investment attractiveness of commercial real estate. These factors have a negative impact on the commercial real estate market in general and cause an overstocking of the sales market in particular. The article gives a recommendation to improve the conditions for mortgage lending in Russia, which consist in carrying out the following measures: expanding the composition of banking assets, the main factor for the implementation of which is the standardization of banking products for the purpose of free sale on the market or pledging for attracted loans in a situation of liquidity shortage; introduction of a long-term bank deposit; introduction of the scheme "long assets - long liabilities", which consists in issuing mortgage loans at the expense of loans in the secondary market by issuing their own mortgage bonds; introduction of securitization; creation of an information base of market parameters for real estate transactions. Also, an investment and credit mechanism has been formed, aimed at expanding opportunities for investing in commercial real estate, developing the commercial real estate market and attracting small and medium-sized businesses. The developed mechanism included three stages: conclusion of a preliminary loan agreement; conclusion of a mortgage lending agreement; attracting investors. As a result of the introduction of the investment and credit mechanism, the following results were obtained: the possibility of reducing the amount of the mortgage loan, reducing the monthly payment, reducing the final cost of the loan, reducing the risk of insolvency of the client, ensuring the investment attractiveness of commercial properties.

COVID-19 pandemic is a stimulus for sustainable development of rural areas and labor markets

Research background: The COVID-19 pandemic has exacerbated the challenges of maintaining the sustainability of urban agglomerations and provides a fresh look at the feasibility of developing rural areas and their labor markets. This situation stimulates the authorities, the population and business to pay attention to the benefits of the development of rural areas Purpose of the article: The main goal of the presented article is assessment of the COVID-19 pandemic impact on the stimulus and opportunities for the sustainable development formulation of rural areas and its labor markets. Methods: For research statistical materials and the results of scientific research by Russian and foreign scientists on the problems of the development of rural areas and their labor markets in the pre-covid period are used. The dynamics and dependence of the incidence of COVID-19 on the population's residence in rural and urban areas in certain regions of Russia, the growth in demand for suburban real estate, the problems of limiting migration during the development of the coronavirus pandemic and changes in labor markets that stimulate the relocation of the population to rural areas are investigated. Findings & Value added: The results indicate that the COVID-19 pandemic has created stimulus for the intensive development of rural areas, both on population of the countries and authorities. To maintain the positive trends, the state authorities is needed to invest in sustainable development infrastructure of rural areas, as well as the legislative consolidation of the rights and obligations of freelancers.

STATE REGULATION OF THE REAL ESTATE MARKET IN UKRAINE

The article analyzes state regulation of the real estate market and defines the role of the state. The real estate market is an important part of the system of economic relations of any country. It is not only closely related to the processes taking place in all other markets, but also significantly affects the financial and cash flows in the economy, their direction of movement and the level of profitability. Taking into account the constantly growing demand for real estate not only at the regional, but also at the state level, the low solvency of the population and the unbalanced development of certain segments of the real estate market, the issue of state regulation of its functioning is very urgent.

Land Price Dynamics and Macroeconomic Fluctuations with Imperfect Substitution in Real Estate Markets

The collateral channel, whereby an increase in residential house prices leads to an increase in commercial property prices, loosening firm borrowing constraints and increasing firm investment, is weaker when residential and commercial real estate are imperfect substitutes. We enrich the DSGE model of the collateral channel in Liu, Wang, and Zha (2013) by adding a land development sector to allow residential and commercial land to be imperfect substitutes. Bayesian estimation of our structural model based on aggregate U.S. data indicates imperfect substitution between the two types of land. With variance decompositions and impulse responses, we show that the strength of the collateral channel linking residential house prices and firm investment is weaker when the two types of land are imperfect substitutes. When residential and commercial land are assumed to be perfect substitutes, shocks to residential real estate demand explain 20-30% of the variance of total output and 30-40% of the total investment, but with the imperfect degree of substitution that we estimate, the same shocks explain less than 10% of the variance of output and 12-15% of investment.

The role of real estate and gold as inflation hedges: the Islamic influence

PurposeThis paper aims to understand how aversion to interest income in Islam may influence the demand for real estate and gold when inflation is rampant.Design/methodology/approachAccording to Markowitz’s mean-variance model, an optimal portfolio is one that blends maximum return with minimum variance. In investment portfolios, real estate and gold serve as inflation hedges. For religious reasons, many Muslims exclude interest-earning assets from their portfolios, however. This paper explores how this attitude influences the hedging role of real estate and gold when inflation is rampant. This paper compares optimal portfolios that include and do not include interest-earning assets. In the calculations, this study uses monthly Turkish data from 1997 until 2018.FindingsThe analysis shows that the best hedging instrument against inflation is an interest-earning asset. In its absence, the role of real estate and gold as inflation hedges markedly increases: For a medium-return and medium-risk portfolio, for instance, the portfolio share of gold holdings increases from 3.16% to 58.43% and that for real estate increases from 14.97% to 24.06%.Originality/valueThis paper is a pioneering work on the influence of Islam on the roles of real estate and gold as inflation hedges when inflation is rampant. It provides an explanation from financial theory for the strong real estate and gold demand in Turkey in the past two decades.

Urban development and negative differential rent [Lo sviluppo urbano e la rendita differenziale negativa

The growth of building land does not always produce a positive differential rent on the existing building stock. The essay aims to discuss the case where urban expansion has negative effects on the rent of existing building plots and constructions. In other words, the differential rent assumes negative values that increase over time, lowering the value of existing properties. This occurs when the expansion of the city does not correspond to a real need for new housing. Generally, it happens in the presence of urban centres already in an advanced phase of demographic contraction, when the existing building stock would be sufficient to satisfy the real estate demand. This expansion (sometimes achieved through urban plans or building programs, others in the total absence of plans) is a phenomenon that, since the 1960s, has affected (and still affects) many smaller towns in Italy. While in the cities that attract population, urban expansion led to the creation of a positive and growing rent (absolute and differential), in the centres suffering from depopulation the same type of expansion had adverse effects on the existing building stock.