Foreign Real Estate Investment Research Articles

Determinants of Foreign Versus Domestic Real Estate Investment: Property Level Evidence from Listed Real Estate Investment Firms

We examine the determinants of foreign real estate investment relative to the domestic case using the portfolios of a large sample of publicly traded real estate investment companies; where foreign investment is defined as the property owner headquarters being located in a different country than a given asset. The cross-sectional results provide strong evidence that real estate firms are more likely to take a smaller stake in larger assets when investing abroad. The penchant for large assets holds when controlling for economic activity, real estate investment opportunities, depth and sophistication of the capital markets, investor protection and the legal framework, administrative burdens and regulatory limitations, and the socio-cultural and political environment at both the property nation and headquarter nation levels. In general, foreign ownership is less likely with industrial, office, retail, and self-storage properties. Capital market development is consistently negatively related to foreign investment.

Determinants of Foreign versus Domestic Real Estate Investment: Property Level Evidence from Listed Real Estate Investment Firms

Determinants of Foreign versus Domestic Real Estate Investment: Property Level Evidence from Listed Real Estate Investment Firms

The Politics of Foreign Investment in Australian Housing: Chinese Investors, Translocal Sales Agents and Local Resistance

This article analyses the cultural, housing and intergovernmental politics of individual foreign investment in Australian real estate. The first section provides a brief history of Australia's housing system and shows the historical trend toward housing affordability ‘problems’ in Sydney and Melbourne. This review interrogates the claim Chinese investors compounded Australia's housing affordability problem after the global financial crisis. The second more substantive section draws on interview, real estate website and media data to demonstrate how the Australian housing system and Chinese and Australian actors enabled Chinese investment in Australian real estate. The third section demonstrates how a minority of Australian residents and some journalists are contesting Chinese foreign investment in Australian real estate. This study shows how contemporary global real estate relations complicate the politics of Asian real estate investment in Anglo-sphere countries.

Determinates of Foreign Real Estate Investment within Thailand’s Special Autonomous Systems (SAS) of Bangkok and Pattaya City

Determinates of Foreign Real Estate Investment within Thailand’s Special Autonomous Systems (SAS) of Bangkok and Pattaya City

DOES REAL ESTATE TRANSPARENCY MATTER FOR FOREIGN REAL ESTATE INVESTMENTS?

The purpose of this paper is to examine the impact of real estate transparency (RET) on foreign real estate investments (FREI). Most of the previous studies have argued that the free flow of information and the fair and consistent application of local property laws could attract greater amounts of FREI. Using observations from 32 countries covering 2004, 2006, 2008 and 2010 and applying fixed-effect and the generalized method of moments (GMM) techniques, our empirical results reveal that RET is not a major determinant of FREI. However, we find that the effect of RET on FREI is dependent on its interaction with the level of income implying that the higher the level of income in the host country, the higher the effect of RET on FREI. Finally, the results show that foreign direct investment (FDI) in other sector, market size and property prices are important determinants of FREI.

Real estate market factors and foreign real estate investment

PurposeThe purpose of this paper is to examine the effects of real estate market factors on foreign real estate investment (FREI).Design/methodology/approachApplying panel data technique, this paper uses related observations from 31 countries (inclusive of developed countries and emerging market economies) between 2000 and 2008 to investigate the relationships between real estate market factors and FREI.FindingsControlling for market size, infrastructure and political stability, the results for all countries indicate that lower financing costs and higher levels of transparency in real estate market attract greater amounts of FREI. Moreover, the paper finds that foreign real estate investors favor countries with higher property prices. Interestingly, when the paper splits the sample in developed countries and emerging market economies the paper finds that there are some differences in results in terms of determinants of FREI.Originality/valueWhile FREI is a large component of service FDI, currently there are no analyses of FREI determinants across a broad set of countries over time. Therefore, the present study has filled this gap.

Economic Rationale Behind the Policy Regarding Foreign Investment in the Australia

In June 1996, the Government included the Act in the schedule of reviews of legislation that impose costs upon business. Also, in its Individual Action Plans from 1996 to 1998 Australia committed to other Asia Pacific Economic Cooperation (APEC) countries that it would rationalize restrictions on foreign investment in real estate, and review the screening system in relation to foreign investment in ‘non-sensitive’ sectors. In February 1999, the Prime Ministers of Australia and New Zealand established a Joint Prime Ministerial Task Force on Australia and New Zealand Bilateral Economic Relations. Following the work of this Task Force, on 4 August 1999 the Prime Minister announced a number of changes to Australia’s foreign investment regime that would facilitate investment between Australia and New Zealand. On 3 September 1999, following work pertaining to the scheduled review of foreign investment, the Treasurer announced a further set of measures and reiterated those changes announced by the Prime Minister. All measures took effect from 10 September 1999.

The Effects of Transaction Costs, Landlord and Tenant Practices and Property Rights on Foreign Real Estate Investment

The purpose of this article is to examine the relationships between real estate market factors (transaction costs, landlord and tenant practices and property rights) and foreign real estate investments (FREI) after controlling for other relevant determinants of FREI. This article uses related observations from 38 countries to investigate the relationships between real estate market factors and FREI. Our analysis shows that countries with lower transaction costs and higher level of property rights attract greater amounts of FREI. Furthermore, our empirical results indicate that there is a positive and significant relationship between pro-landlord practices and FREI. JEL Classification: R3, D23, P26

THE EFFECT OF FOREIGN REAL ESTATE INVESTMENTS ON HOUSE PRICES: EVIDENCE FROM EMERGING ECONOMIES

In recent years, most emerging economies have experienced large foreign real estate investment (FREI) and an appreciation of house prices. The purpose of this study is to empirically investigate the effects of FREI on house prices by employing a panel VAR model. Using data from 21 emerging economies over the period 2000–2008, our empirical results show that FREI contributes to house price increases. Moreover, the results indicate that the dominant source of house price fluctuations in emerging economies come from the housing market itself.

THE EFFECT OF TOURISM AGGLOMERATION ON FOREIGN REAL ESTATE INVESTMENT: EVIDENCE FROM SELECTED OECD COUNTRIES / TURIZMO AGLOMERACIJOS POVEIKIS UŽSIENIO INVESTICIJOMS Į NEKILNOJAMĄJĮ TURTĄ: ĮRODYMAI IŠ ATRINKTŲ EBPO ŠALIŲ

The purpose of this study is to investigate the effect of tourism agglomeration on foreign real estate investment (FREI). Using a panel of 19 OECD countries over a period of 10 years (1999-2008) and controlling for some relevant factors, econometric analysis indicates that tourism agglomeration is a significant determinant of FREI. The result has some implications for policymakers in order to recover their real estate sectors which were hit in recent financial crisis. Santrauka Šio tyrimo tikslas – išnagrinėti turizmo aglomeracijos poveikį užsienio investicijoms į nekilnojamąjį turtą (UINT). Pasirinkus 19 EBPO šalių imtį, stebimą 10 metų (1999–2008 m.), ir kontroliuojant kai kuriuos atitinkamus veiksnius, ekonometrinė analizė rodo, kad turizmo aglomeracija daro reikšmingą įtaką UINT. Rezultatai iš dalies reikšmingi politikos strategams, kurie siekia atgaivinti nekilnojamojo turto sektorius, paveiktus neseniai praužusios finansų krizės.

Law as Asymmetric Information: Theory, Application, and Results in the Context of Foreign Direct Investment in Real Estate

In his seminal 1970 article on lemon markets, George Akerlof posited the possibility of market failure in the presence of asymmetric information regarding a good’s value. In the intervening four decades, the importance of accurate valuation information has grown as transnational trade has boomed. The aim of the instant article is to assess the potential impact on transnational trade of asymmetric information regarding the legal attributes of a given good. Inaccurate or asymmetric information regarding relevant legal attributes may give rise to the same problem of market failure that Akerlof initially posited. If buyers are unsure of the ownership of a good, its conveyability, or their rights and obligations in a given transaction, they might decline to transact at all. If these legal uncertainties are pervasive, transactions in that market might cease to take place altogether.Nonetheless, consistent with the remainder of Akerlof’s article, the presence of certain counteracting institutions may lessen the impact of asymmetric information, thus forestalling market failure. These counteracting institutions in the context of asymmetric information regarding legal attributes would include a fully and fairly functioning judiciary, publicized and lucid laws and regulations, and other such mechanisms that would make clear the rights and obligations of all parties to a transaction. Thus, this article addresses the possibility of law as asymmetric information in the general sense and the specific, by assessing whether asymmetries regarding property law might contribute to market failure in the context of foreign direct investment in real estate. Regardless of whether that market is a lemons market, the conclusions of this article support systemic reform in the property regimes of developing and transition economies, to ensure that shortcomings in the institutional and legal frameworks of these states do not hinder fuller economic development.

Modelling Foreign Real Estate Investment: The Spanish Case

Foreign real estate investment in Spain has grown considerably during the last decade, representing around 40% of total foreign direct investment inflows. This trend has exerted an important macroeconomic effect maintaining a long lasting housing bubble and contributing significantly to finance the rising current account deficit. Foreign real estate investment in Spain is mostly of a housing acquisition type and therefore the analysis of its determinants requires a specific approach. In this sense, neither a pure foreign direct investment nor a portfolio theoretical model might be useful. So we propose a modelling of foreign real estate investment for Spain from the point of view of a demand for tourism services and from a financial focus. Using time series data from 1990 to 2007 the hypothesis arising from our foreign real estate investment modelling reveals the consistency of this approach. There seem to be relevant determinants from the demand side and from the financial dimension. Indeed, Gross Domestic Product per capita, expected capital gains, travel costs, tourism agglomeration and housing prices are all relevant factors explaining Foreign real estate investment. We consider that this case study may also be applied to other countries sharing similar foreign real estate investment type flows.

Should Foreign Real Estate Investment be Controlled in China?

Housing prices in China has been increasing rapidly in recent years. While local speculators are blamed for the escalating house prices, foreign real estate investors are also regarded as accomplices for causing the problem. New measures known as the Opinions on Regulating Market Access and Management of Foreign Investment in China’s Real Estate Market were introduced to restrict foreign real estate investment in the country. This paper attempts to examine the justification of the control and its impact on foreign investors. The investigation shows that foreign real estate investment is a tiny portion of the total real estate investment in China and has not cause a threat to the market. The scale of foreign investment does not justify the introduction of the controls.

The Determinants of Foreign Real Estate Investment in Taiwan

This study examines the preferences of foreign investors in the Taiwan real estate market. A multi-criteria decision analysis tool (Analytic Hierarchy Process: AHP) is used to examine how foreign real estate companies determine their localization in Taiwan. This paper identifies the factors that could explain foreign investors’ selection criteria when they decide to invest in Taiwan. The results of our research could be used by the State economic development agencies, real estate developers and central-level policy-makers. The article concludes that among the 24 chosen criteria, the level of perational risk seems to be the determining decision factor.

International Real Estate Review

Foreign real estate investment funds have recently been added to the practical investment opportunity sets of ordinary Japanese investors. This paper analyzes the additional diversification benefits of U.S. REITs and Australian listed property trusts (LPTs) for Japanese investors who already hold Japanese, U.S., and Australian financial assets while considering different risk definitions in a mean-lower partial moment (MLPM) framework. The study uses data from August 1994 to July 2004. The impacts of currency adjustment and risk definition on the diversification benefits are examined. Our results suggest that the additional diversification benefits of U.S. REITs and Australian LPTs can be obtained only in very limited cases by Japanese investors.

Foreign “Direct” and “Portfolio” Investment in Real Estate: An Eclectic Paradigm

Executive Summary. Foreign direct investment (FDI) and foreign portfolio investment (FPI) are traditionally treated as mutually exclusive, and researchers generally focus on only one or the other. While this approach may be appropriate for some types of investments, real estate investments are often hybrids that possess characteristics of both FDI and FPI. This research synthesizes existing theories of FDI and FPI into one methodological approach in the case of investment in real estate. The authors extend John Dunning's “Eclectic Paradigm” (1977) to allow for independent and aggregate evaluation of both FDI and FPI characteristics to enhance decision making regarding foreign real estate investments. This approach is illustrated by applying it to Japanese investment in U.S. real estate. This research should prove valuable to practitioners evaluating the various influences on foreign investment in real estate.

Diversification Benefits from Foreign Real Estate Investments

Diversification Benefits from Foreign Real Estate Investments

Diversification Benefits from Foreign Real Estate Investments

Executive Summary. Previous research has questioned the stability of international equity diversification. This study examines whether foreign real estate exists in a more segmented market and whether foreign real estate provides any diversification benefit beyond that obtainable from foreign stocks. Using data encompassing the stock market crash of 1987, foreign real estate was found to have a lower correlation with U.S. stocks than foreign stocks. This lower correlation is shown to be stable through time as foreign real estate has a lower correlation in nearly the entire time period. Foreign real estate was also found to have a significant weight in efficient international portfolios.

Uncertainty and Foreign Real Estate Investment

Uncertainty and Foreign Real Estate Investment

Uncertainty and Foreign Real Estate Investment

Published research has offered little evidence in support of foreign real estate investment. Most of the literature suggests that foreign real estate yields investors in mixed-asset portfolios no tangible benefits in terms of diversification gains. However all these studies were done on the basis of point estimates where they solve for a single unique optimum portfolio composition. Thus, earlier research has left the impression that foreign real estate is “never” optimal. Here we use a bootstrap simulation to introduce uncertainty into the analysis. Our results suggest that although foreign real estate is not likely to provide investors with significant diversification benefits, substantial amounts of foreign real estate can potentially be optimal.