Foreign Real Estate Investment Research Articles

Exploring determinants impacting foreign direct investment in the real estate sector: a study on the Indian economy

PurposeForeign direct investment in the real estate (FDIRE) sector is required to bridge the gap between investment needed and domestic funds. Further, foreign direct investment is gaining importance because other sources of raising finance such as External Commercial Borrowing and foreign currency convertible bonds have been banned in the Indian real estate sector. Therefore, the objective of the study is to explore the determinants attracting foreign direct investment in real estate and to assess the impact of those variables on foreign direct investments in real estate.Design/methodology/approachJohansen cointegration test, vector error correction model along with variance decomposition and impulse response function are employed to understand the nexus of the relationship between various macroeconomic variables and foreign direct investment in real estate.FindingsThe results indicate that infrastructure, GDP and tourism act as drivers of foreign direct investment in real estate. However, interest rates act as a barrier.Originality/valueThis article aimed at exploring factors attracting FDIRE along with estimating the impact of identified variables on FDI in real estate. Unlike other studies, this study considers FDI in real estate instead of foreign real estate investments.

Chinese Foreign Real Estate Investment and Local Voting in US Presidential Elections

Abstract Despite the increasing globalization of housing markets, little is known about its political implications. This study investigates whether rising Chinese investments in US homes influenced local voting in recent US presidential elections. Building on pocketbook/sociotropic voting and nativism theories, I develop hypotheses on the electoral consequences of foreign real estate investment through greater home demand and equity, improved local economies, and changing neighborhoods. Using difference-in-differences designs that combine a unique shock to Chinese capital outflows in 2013 with county-level measures of local attractiveness to Chinese investments, I find that greater exposure reduced Democratic vote shares in both the 2016 and 2020 presidential elections. Furthermore, an initially larger white population strengthened this effect, while a larger college-educated population weakened it. In contrast, local equity gains, housing competition, or economic strength did not systematically influence the effect. Together, the results appear more consistent with the pro-conservative effects of nativism.

On real estate market transparency: The relationship with ICT trade and investment

The relationship between information and communication technology (ICT) investment, ICT trade, and real estate market transparency is examined in this paper. National-level bi-annual data from a sample of advanced and emerging market economies for the period 2004–2018 underpins this work. The regression analyses suggest greater levels of capital investment in ICT and ICT trade are associated with increased transparency in the real estate market. The effect is more pronounced in emerging economies than in advanced ones. Real estate market transparency is also higher in contexts having less restrictions on foreign real estate investment, coupled with corruption controls. These findings also align with existing literature inferring that countries with common law traditions are often more transparent than those from civil law origins.

Is Rising Residential Land Prices a Consequence of Domestic or Foreign Land Demand? Evidence From Mauritius Island

Some emerging island economies have been fostering foreign direct investments in the real estate market. Given the rise in real estate demand under such contexts, this must have entailed a rise in land demand, and subsequently, land prices could have been affected. This study assesses if the rise in land demand caused by domestic and/or foreign land demand has been influencing residential land prices in Mauritius. To undertake the research, annual data was collected from the year 2000 to 2019 and a structural time series approach was used. It was found that unobserved components, namely the trend level and slope, as well as the cycles were significant in explaining land prices. It was concluded that fluctuations in land prices are significantly explained through latent variables, such as regulations in the land market, fiscal policies concerning mortgage loans, and speculative land buying among others. It was also found that foreign real estate investment (FREI) used as a measure of foreign land demand did not significantly influence land prices. To further probe the factors affecting land prices in Mauritius, domestic demand-side factors were considered and it was found that income, population, unemployment, and real construction costs were significant in explaining land prices.

A dynamic analysis of the influence of foreign real estate investments on residential land prices in Mauritius

PurposeMauritius’s residential real estate sector has undergone an increase in foreign investment over the past decades. This study aims to establish if the increasing level of foreign real estate investments (FREI) has increased land demand and land prices. The study also aims to depict whether the relation between FREI and land prices prevails at an aggregate and/ or a regional level.Design/methodology/approachData from 26 regions, classified as urban, rural and coastal is collected on an annual basis over the period 2000 to 2019, and a dynamic panel regression framework, namely, an autoregressive distributed lag model, is used to take into account the dynamic nature of land price modeling.FindingsThe findings show that, at the aggregate level, in the long-term, FREI does not have a significant influence on land prices, while in the short term, a positive significant relationship is noted between the two variables. A regional breakdown of the data into urban, rural and coastal was done. In the long term, only in coastal regions, a positive significant link was observed, whereas in urban and rural regions FREI did not influence land prices. In the short term, the positive link subsists in the coastal regions, and in rural regions also land prices are positively affected by FREI.Originality/valueUnlike other studies which have used quite general measures of FREI, the present research has focused on FREI mainly undertaken in the residential real estate market and how these have affected residential land prices. This study also contributes to research on the determinants of land prices which is relatively scarce compared to research on housing prices.

Foreign Direct Investment in the Los Angeles Real Estate Market

The growing globalization of domestic housing markets has led to the rise of foreign investment in real estate; however, foreign investment in real estate has strong potential to impact domestic citizens. Past research alludes to foreign investment impacting housing prices, employment rates, and homelessness in varying ways depending on the affected demographic. This study utilizes data from the 2010 and 2020 U.S. Census’ to analyze how foreign investment impacts housing prices, employment rates, and homelessness rates in zip codes of the Los Angeles metropolitan area. Furthermore, a comparison is drawn between how these elements have changed in the past decade as a result of the extent of foreign presence in the area. Ultimately, this paper deduces that housing prices rise, employment and homelessness rates fall, and homelessness rates change negligibly as a result of foreign investment in the Los Angeles area.

Analysis of Foreign Direct Investment Attraction in Vietnam Real Estate in the Pandemic Condition

The economy of Vietnam is a socialist-oriented emerging market that heavily depends on agriculture, tourism, raw material exports, and foreign direct investment. Vietnam is industrializing and modernizing from a low starting point with weak and small economic resources. This is one of the huge obstacles to the development of Vietnam’s economy. Therefore, mobilizing and leveraging foreign direct investment are very important. In the COVID-19 pandemic, many large international corporations and enterprises are looking for investment opportunities to diversify their supply chains and limit their overdependence on the Chinese market. Vietnam has emerged as one of the brightest candidates for this capital flow due to its success in epidemic prevention. While foreign direct investment has been declining globally, foreign direct investment in Vietnam has rebounded in the second quarter of 2020 and has been on an upward trend. The real estate market remained an active segment in the third quarter of 2020. This article uses comparison, logical and statistical analysis methods to study foreign direct investment in real estate in Vietnam. The contribution analyzes the factors that influenced the desire of foreign investors to invest in the Vietnamese real estate market, based on publicly available data sources of the Foreign Investment Agency, Vietnam Ministry of Planning and Investment; and the General Statistics Office of Vietnam. Solutions at the state level to stimulate investment in Vietnam are proposed.

The uneven geography of real estate investment by Mainland Chinese state-owned and private enterprises in the U.S.: Local market conditions, migration, and ethnic networks

Since the 2010s, foreign direct investment in real estate (FDIRE) by Mainland Chinese firms has emerged as a major force within global real estate markets, challenging Western investors’ traditional dominance. It is unclear, however, whether Mainland Chinese FDIRE is fueled by the same motivations as those of investors from advanced economies, which to date have represented both the primary investors and main objects of study. One major difference may be that Mainland Chinese investment originates in an institutional environment comprised of strong state intervention and social networks important for fostering business and ethnic ties. To uncover the potentially unique determinants and heterogeneity of Mainland Chinese corporate real estate investors, we build and analyze a state-level panel dataset of Mainland Chinese FDIRE by state-owned enterprises and private enterprises in the U.S. from 2010 to 2017. Our empirical results reveal the importance of Chinese migrants in promoting Mainland Chinese real estate investment, especially by private enterprises. Our findings also demonstrate that at the state level, Mainland Chinese FDIRE exhibits few agglomerative tendencies.

The Uncertainty Index and Foreign Direct Real Estate Investments in Developing Economies

Attainment of standards in a country’s real estate market to meet international investors’ expectations contributes significantly to the real estate sector. However, in developing economies characterized by an environment of uncertainty where stability cannot be achieved, direct investments in real estate can bring returns to foreign investors. This is because economic uncertainty in developing countries raises the exchange rate. An increase in the exchange rate keeps real estate prices in developing countries relatively low. Foreign investors then take advantage of the low prices to invest in real estate in that country. The study aims to research whether the uncertainty in developing countries increases the foreign direct real estate investments. The study examines the relationship between the uncertainties in selected developing economies in Europe and the real estate investments by foreigners in the period 2008–2018. Gengenbach, Urbain, and Westerlund Panel Cointegration test and PDOLS coefficient estimation methods were used in the study. According to the analysis results, a 1% increase in the uncertainty index in the economies examined increases foreign direct investments by 5.731%. Since this study is one of the most detailed studies measuring foreign direct real estate investments under uncertainty conditions in the economy, it contributes to the literature. To sustainably increase foreigners’ direct real estate investments in developing countries, economic and political stability should be prioritized. Facilitating the bureaucratic process, providing tax reductions, making real estate suitable for demand, following the appropriate price policy, and making various environmental regulations will also increase foreigners’ direct real estate investments. Doi: 10.28991/esj-2021-01293 Full Text: PDF

Chinese property developers after the decline in foreign real estate investment in Sydney, Australia

This study investigates how Chinese developers responded to the changing patterns of investment in residential real estate in Sydney since 2010. The analysis also outlines the key lessons for cities around the world with high levels of Chinese foreign buyers and developers, which may experience a similar foreign real estate investment decline as a result of changing dynamics in domestic real estate markets, changes in China, and/or wider changes in the global economy or other key global events. Unlike Chinese individual foreign real estate investors who largely exited the real estate market after 2017, Chinese property developers remained committed to the domestic market in Australia. As such, this analysis is framed by a period of individual foreign capital withdrawal and is focused on foreign developers rather than individual foreign real estate investors. The paper argues that focusing on the actions of foreign developers in a domestic real estate market is important because the organisational structure and business practices of foreign developers can be vastly different to those of domestic developers. The analysis shows that since 2017 Chinese developers responded in two ways to the changing residential real estate market in Sydney: (1) they revised their sales strategies to target different customer groups; and/or (2) they changed their building practices.

외국인직접투자가 중국 부동산시장에 미치는 효과에 관한 실증 연구

In this paper, we attempt to examine the effects of foreign direct investment in real estate (FDIRE) on the housing prices in China. We employ ARDL (AutoRegressive Distributed Lag) bound test (Pesaran et al. 2001) to investigate the long-rum relations between macroeconomic variables. We use FMOLS (Phillips and Hansen, 1990) and DOLS (Stock and Watson, 1993) to calculate the individual cointegration vectors. We select four categories of commercial residence buildings as dependent variables, namely, business, commodity, residence and office buildings. Based on existing literature, we employ four macroeconomic variables as independent variables, i.e. interest rate, exchange rate of RMB to US dollars, FDIRE and industrial growth ratio as proxy variable of GDP. We find that the FDIRE has a significant negative effect on the real estate prices in China. This implies the Chinese government should keep providing favorable conditions for more FDIRE to stabilize the booming real estate market in China.

Analysing the relationship between foreign real estate investment and tourism development

ABSTRACT The primary aim of this research is to analyse the effect of Foreign Real Estate Investment (FREI) on tourist development using a panel dataset of 33 countries over the time period 2000–2016. Given the potential dynamic and endogenous relationship in the FREI-Tourism development nexus, this paper employs a Panel Vector Error Correction Model (PVECM) and a comparative analysis is further conducted by segregating the sample into sub-samples of developed and developing countries. The empirical results indicate that FREI is positively significant, although to varying extent, in explaining tourist growth. There is also evidence of reverse causality, as tourism is observed to also affect FREI in a positive and significant way, at least in the long run. This study is believed to contribute to the debate by bringing additional evidences in the developing countries context while also analysing the link between tourism development and FREI in a comparative setting of developed countries and developing countries.

한국 기업의 해외부동산 직접투자 진출에 대한 연구

Korea enacted the Foreign Exchange Management Act on December 31, 1961 for the purpose of balancing the balance of balance of payments, stabilization of currency value and efficient management of foreign currency funds. Therefore, the changes in real estate direct investment performance and related foreign exchange policy changes were examined using foreign real estate investment data from 1986 to 2016. The correlation between foreign direct investment and major macroeconomic variables (GDP, Kospi, exchange rate, domestic interest rate, etc.) Significance was reviewed through relationship analysis. As a result of the study, the government's univariate policy enforcement on foreign real estate direct investment has been evaluated to have a very positive effect on maintaining the balance of the balance of payments and stabilizing the economy. While the burden ratio had a significant effect on the company’s net direct investment in foreign real estate, the real estate market share and KOSPI index did not have a significant effect on the company’s net direct investment in overseas real estate.

An investigation of factors influencing maturity levels of property market in southwestern Nigeria

PurposeThe study investigated the factors influencing maturity levels in the Nigerian property market particularly southwestern Nigeria in sub-Saharan Africa. There is a need to identify the factors responsible for the less notable progress in the market in order to proffer measures that will enhance the property market or attract both local and international real estate investors.Design/methodology/approachThe method of data analysis adopted is weighted mean scores. The study sampled estate surveyors, public land administrators and financier, which are represented by the commercial bank. The respondents were presented a list of 40 factors and asked to rank them on a seven-point Likert scale. In order to reduce the variables responsible for the maturity levels into a few factors, factor analysis was employed.FindingsThe factors identified by respondents as the most responsible for the maturity levels observed (those with the highest weighted mean score of 6.52, 6.35 and 6.31) include government policy on interest rate, safety of property right/titles and insufficient property market information. Using factor analysis, the variables were further grouped into six factors namely monetary policy, property right registration, property professionalism, investor friendliness, property data and economic factors.Practical implicationsOn the basis of findings, the study recommends that the government should create an enabling environment for prospective investors/or property owners by taking measures that will improve the ease of doing business at same time enhance the foreign real estate investment. The government should pass enabling legislation that will make real estate financing a feature of the capital market. The Central Bank of Nigeria can help in managing the rate of inflation in order to reduce the cost of the construction materials so that average Nigerian can be able to own property asset. Prominent real estate firms should in conjunction with The Nigeria Institution of Estate Surveyors and Valuers develop property data bank on market fundamentals, e.g. rental/capital values, yields, construction cost indices, etc.Originality/valueThe paper provided the information on the factors that will enhance property maturity levels in southwestern Nigeria.

Protectionist Property Taxes

National restrictions on trade and immigration are the most salient illustrations of the current protectionist moment, but cities have played their part too, taxing foreign investors in local real estate and imposing second or vacant home taxes that indirectly burden foreign investment. Although these protectionist property taxes are new, they draw from an old well of suspicion about foreign ownership. We provide economic and historical context for the recent wave of protectionist property taxes and evaluate their legality under U.S. law. We conclude that taxes on second or vacant homes would likely survive constitutional challenge but facially protectionist property taxes probably would not. We then assess the policy merits of these taxes using an economic framework that highlights how law affects housing risk. We show that foreign real estate investment can reduce the riskiness of local housing markets, so that even if a city can get away with enacting a protectionist property tax, it is not typically a good idea. Government spending can better achieve policy goals such as affordable housing and neighborhood stability without running afoul of constitutional prohibitions.

The Gulf in Bosnia and Herzegovina: an (un)intentional consequence of peace

The rapidly changing (sub)urban and architectural landscape of Bosnia and Herzegovina instigated this research in the surge in foreign real estate investment after the war in the 1990s. This article focuses on the influx of capital from the Gulf States that was directed into residential developments, tourist resorts and commercial buildings. It scrutinises the Dayton Peace Agreement and its role as a state-building mechanism that sets this case study apart from its global counterparts. To unpack its complexity, a mix of different methodologies has been employed. The Agreement operated within the specific ethno-religious context of the region. It was underlined by a structural violence deeply embedded at its core. As such, the Agreement produced a new milieu that proved conducive to the flow of global capital. But the influx of capital from the Gulf States challenged the pre-existing binary relationship between the Agreement and the ethno-religious identities of the region. This intense encounter produced a milieu of corruption and underhanded practices, including the deregulation of planning policies and land grabbing. It also endorsed the instrumentalisation of religion as a bait for foreign investment.

Sustainable Policy Dynamics—A Study on the Recent “Bust” of Foreign Residential Real Estate Investment in Sydney

We undertook an autopsy of the drivers of individual foreign real estate investment ‘bust’ in Australia through a new theoretical lens of ‘habitus’. Our autopsy data drew contours around the individual foreign real estate capital ‘boom and bust’ cycle, as well as the long-term commitment of professionals in the real estate sector to Australia’s real estate market. More specifically, we showed that the foreign capital ‘boom and bust’ cycle began in earnest in about 2010 (starting at A$8.7 billion), grew to A$72.4 billion in 2016–2017, and then declined to A$12.5 billion in 2017–2018. This decline in foreign capital into Australian real estate occurred within a domestic real estate market in Sydney that also started to slow in 2017. Based on 20 semi-structured interviews with real estate professionals in Sydney and public material culture data, we found out that the off-the-plan apartment sales and global policy landscape changes contributed to the decline of foreign real estate investment in Australia. The three possible implications for Sydney’s future residential real estate development: (1) The loss of investors, (2) the evolution of the labor force, and (3) the diversification of housing products, have been raised as part of a future research road map.

Do Taxes Matter to Foreign Real Estate Investors? Evidence from FIRPTA Reform

There is little research on whether foreign real estate investors respond to domestic taxes, which is somewhat ironic given that real estate is such a tax-driven industry. This article investigates the impact of taxes on foreign investment in real estate by exploring the response to 2015 reforms to the Foreign Investment in Real Property Tax Act of 1980, a unique section of the US Internal Revenue Code that imposes real estate income and capital gains withholding taxes on foreign investors. The new law exempts qualified foreign pension funds, with the effect of reducing capital gains withholding taxes by up to 35% depending on investor position and home country tax treaties. The authors find that this reform led to a five to seven percentage point increase in annual investment growth from pension funds in countries that experienced a tax rate decrease, relative to general trends in foreign pension fund investment in US real estate investment trusts. In addition, the results suggest that pension funds in those countries responded almost immediately. TOPICS:Real estate, legal/regulatory/public policy Key Findings • The results in this paper suggest that domestic income taxes can be an important determinant of foreign investment in domestic real estate. • Recent changes to the U.S. taxation of foreign investment in U.S. real estate were associated with increased annual growth in investment in U.S. REITs from foreign pension funds in countries that received a tax rate decrease (relative to general foreign pension fund investment trends). • Additionally, affected foreign pension funds appear to have adjusted their investment immediately after the tax reform went into effect.

Foreign investment in Australian residential properties

PurposeThe purpose of this study is to examine the impact that foreign investment in existing houses and new housing development has on residential house prices and the growth of the housing construction sector.Design/methodology/approachThe analysis is based on a panel cointegration method, estimated using annual data for all Australian states and territories spanning the period of 1990-2013.FindingsThe results indicate that increases in foreign investment in existing houses do not significantly lead to increases in house prices. On the other hand, a 10 per cent increase in foreign investment for housing development decreases house prices by 1.95 per cent. We also find that foreign real estate investments have a positive impact on housing construction activities in the long run.Originality/valueExisting studies used aggregate foreign real estate investment in their analyses. As foreign investment in existing houses and foreign investment for housing development have different impacts on the demand and supply sides of housing market, it is crucial that the analysis of the effects of foreign investment in residential properties on real estate market is conducted for each type differently.

The Determinants of Foreign Direct Investments in Real Estate: Turkey Case

The aim of this study is to investigate the key factors affecting foreign direct real estate investment (FDIRE) in Turkey’s economy. A DOLS-FMOLS estimator model was developed to investigate the determinants of FDIRE in Turkey. Data was used between 2003Q1-2018Q2. This study differs from the previous ones in that this particular topic is being researched as regards the economy of Turkey for the first time. The results showed that the most important variables affecting foreign direct real estate investment in Turkey was openness and exchange rate. Furthermore, economic growth also has a positive impact. On the other hand, interest has been found to be the most negative factor affecting investments. Moreover, the increase in building construction costs directly reduce foreign real estate investment. The results show that the gradually increasing openness of Turkey’s economy contributes to the increase in foreign investments in the real estate market.