Rental Growth Research Articles

A new measure of private rental market regulation index and its effects on housing rents

Purpose The purpose of this paper is twofold: first, the authors construct a country-specific time-varying private rental regulation index for 18 developed economies starting from 1973 to 2014. Second, the authors analyze the effects of their index on the housing rental markets across 18 countries and states. Design/methodology/approach The authors’ index not only covers 18 developed economies over 42 years but also combines both tenure security and rent laws. The authors’ empirical framework is that of panel regressions with time and country fixed effects. Findings The authors’ index sheds further insights on the extent to which rent and tenure security laws have converged over the past 40 years for each economy. Moreover, the authors show three empirical results. First, stringent rent control regimes do lead to lower real rent growth rates than regimes with free rents. Second, soft rent control regimes with time-limited tenure security and minimum duration periods, however, may cause higher rent growth rates than free rent regimes. Third, rent-free regimes do not show significant high real rent appreciation rates. Originality/value The authors’ rental regulation index is the first time-varying index that covers more than 18 economies over 40 years.

Natural resources and human development: Evidence from mineral-dependent African countries using exploratory graphical analysis

In this study, we propose a new approach for the visual inspection of interactions between human development and economic growth and a set of variables that reflect the dependence of mineral resources. We focus on the ten African countries with the highest share of mineral exports compared to total exports in the period from 2007 to 2016. First, we provide a descriptive analysis and we rank the countries according to their average annual growth in relation to a set of proxies of resource dependence and economic indicators during the sample period. Second, we cluster the different states by means of a dimensionality-reduction technique that enabled synthesising the information in the rankings into two factors: (a) economic growth and human development, and (b) growth in mineral resource dependence. Finally, we project all countries into a perceptual map and observe four clusters that roughly correspond to the main African regions, and whose distribution shows a slightly negative slope (indicative of a weak inverse relationship between mineral dependence and development). Regarding the interactions among variables, we observe a tenuous negative association between average growth in human development and the relative weight of mineral rents. These results, coupled with the fact that the average growth in resource rents does not materialise in higher economic growth, indicate that corruption may be impeding economic development, especially if it is understood under a more inclusive perspective that incorporates health and education. This finding underscores the need to promote institutional quality and to develop a mining strategy to help revert the effects of the resource curse in mineral-dependent African countries. Accordingly, we propose a series of policy measures based on four main objectives: competitiveness, transparency, sustainability and inclusiveness.

Underinsurance as adaptation: Household agency in places of marketisation and financialisation

The underinsurance of property is pervasively and persuasively promoted as an indicator of risk and riskiness and, in Western nations, is assumed to be aligned with socio-economic disadvantage. Yet, the solution – in its most simple form, buying more insurance – lacks critical interrogation of what the problem actually is. To understand underinsurance better, we map house and contents underinsurance across two municipalities in Australia’s island state of Tasmania, and observe that the existing delineation of disadvantage and advantage between these two places is muted in relation to insurance – underinsurance does not straightforwardly map onto disadvantage. We provide an alternative explanation: that underinsurance is not a risk for households per se and does not represent riskiness on behalf of these households. Rather, it is indicative of household agency that produces place-specified responses within the processes of financialisation and marketisation. We observe that the growth in renting, driven in part by housing financialisation, is associated with property underinsurance. The history of renting as temporary and marginal informs renter decision making not to insure, and thus current financialised changes in housing co-produce rather than ameliorate underinsurance. We also conclude that in negating or resisting insurance marketisation, households garner everyday financial and material adaptative capacity by underinsuring.

Financial Intermediaries as Suppliers of Housing Quality

I show how financial intermediaries affect rental housing quality and affordability by supplying real estate investors with financing for quality improvement projects (i.e., renovations). First, I document a historic surge in improvement activity since the Great Recession. Then, using exogenous variation generated by a 2015 change in regulatory capital requirements, I find that a reallocation of bank credit toward improvement projects accounts for 24% of quality improvements since 2015. The shock increases the supply of high-quality apartments and lowers their rent. However, it raises the average apartment's rent and accounts for 32% of historically high rent growth over 2015-16.

Multifamily Development: Can You Always Lease It Up?

Large institutional investors continue to view multifamily real estate favorably and raise their allocations to this sector. It is commonly perceived among institutional investors that multifamily—and multifamily development in particular—is a safer investment relative to other property sectors, a common refrain being “you can always lease it up.” In this article, the authors attempt to validate this statement by examining the distribution of lease-up terms from initial lease-up to stabilization for multifamily developments delivered in the United States between 2008 and 2018. In addition, they investigate the impact of the length of the lease-up period on effective rents. Unfortunately, they do not have underwritten projections for each development to compare with subsequent performance as a mechanism to determine an investment’s success. Despite this gap in the available data, the authors generally find support for the conventional wisdom; most developments are able to lease-up in a relatively expedient fashion, no matter the position in the economic/business cycle. However, effective rent change over the lease-up period varies significantly by point of cycle and lease-up term and is an important factor in the investment performance of multifamily developments. <b>TOPIC:</b>Real estate <b>Key Findings</b> • Multifamily development is considered lower risk by many investors, relative to other property sectors, as you “can always lease it up.” • Our research confirms this—relatively expedient lease-up is achieved across markets, vintage, property size, etc. • Effective rent growth, on the other hand, is more sensitive to these factors, and varies significantly by lease-up term.

Land turnover of the Republic of Kazakhstan in modern conditions

The article offers recommendations for improving the economic mechanism for regulating land and property relations in the agricultural production of the Republic of Kazakhstan. Developed proposals for the improvement of on-farm land and property relations in agricultural enterprises and farms, methods for adjusting the basic rates of payment for land based on the increase in land rent, land taxation, the land market and land management system. The methodological aspects of the problems of ownership and rental relations, the regulation of land relations in agricultural enterprises and peasant farms, and the development of the land market through the application of legal, economic, administrative, organizational and economic tools have been deepened. The processes associated with the system of payment for land use, valuation of land, use of land resources, formation of land rent and its growth, land tax and rent, land market, land management system are covered. The processes associated with the system of payment for land use, valuation of land, use of land resources, formation of land rent and its growth, land tax and rent, land market, land management system are covered. Particular attention is paid to improving on-farm land and property relations in agricultural enterprises and peasant farms, updating base rates for land based on the method of accounting for land rent growth, recommendations for improving the tax system, developing the land market and land management system. The practical importance of the implementation of proposals to improve land-based rates, the use of a single tax base for all forms of economic management is emphasized, which will allow regulating the activities of the regions based on a weighted state policy, targeted land use, and land market development. The land market serves as an indicator of the state of the relevant economic system, stability and efficiency of the mechanisms of its functioning. The most important factor in the development of the land market is the presence of a wide stratum of real owners interested in acquiring land plots for their effective use. The formation of a market turnover of land is of tremendous economic importance, since it provides a relatively better distribution and use of land resources. Due to the market turnover, land resources are transferred to the use of the most experienced and qualified producers who are able to ensure their rational use.

The Influence of GDP on Rental Growth of Residential Properties in Ede, Nigeria

Changes in rental values may occur in response to changes in economic conditions at all levels of an economy. Against the backdrop of recent unstable GDP growth rates in Nigeria, this study evaluated the influence of GDP on rental growth rates of residential properties in Ede, Nigeria with a view to providing information that will aid better understanding of the dynamics of residential property market for investment decisions. It analyzed the magnitude of growth in rental values of five residential property types comprising tenement room, one room self-contained, room and parlour self-contained, two bedroom flat and three bedroom flat to determine whether significant difference exist in the growth rates across the five property types; the extent of variation in the rental values of the properties types in Ede caused by GDP growth; and also, the relationship between GDP growth rates and rental growth rates of residential properties in the study area. The study utilized both primary and secondary data. Primary data used for the study was collected through structured questionnaire administered on landlords who rented their properties within the study period and comprised rental values of five residential property types between 2002 and 2017. Secondary data for the study comprised Nigeria’s GDP figures between 2002 and 2017. Descriptive and inferential statistical techniques such as frequency table, chart, ANOVA and linear regression were used to analyse the data. The results revealed a mean yearly growth rates of 17.03%, 17.01%, 16.57%, 19.86% and 20.83% for tenement room, one room self-contained, room and parlour self-contained, two bedroom flat and three bedroom flat respectively; and the mean rental growth rates across the selected residential property types at 95% confidence level are not significantly different F (4, 70) = 0.345 P = .847 > .05. Furthermore, during the period under study, GDP values were found to have a strong positive relationship with rental values of residential properties in the study area and accounts for about 73%, 75%, 82%, 76% and 83% of variation in rental values of tenement room, one room self-contained, room and parlour self-contained, two bedroom flat and three bedroom flat respectively. The study however found no statistically significant relationship between GDP growth rates and rental growth rates of residential properties in the study area. Consequently, the study concluded that GDP growth rates do not have significant influence on rental growth rates of selected residential properties in Ede during period understudied.

Long-Run Expectations, Learning and the US Housing Market

In the US housing market, the price-to-rent ratio is volatile and autocorrelated. Returns on housing are positively autocorrelated. The price-to-rent ratio is negatively correlated with future returns and rent growth. Housing returns exhibit time-varying volatility. A benchmark asset pricing model is inconsistent with these facts. A model where prices adjust slowly to their fundamental value and where the agent does not know whether housing fundamentals are trend or difference stationary so has changing beliefs over time, increases the volatility of prices and the autocorrelation of returns. The price-to-rent ratio negatively forecasts returns and rent growth. This model generates time-varying volatility.

Exploring sentiment-driven trading behaviour of different types of investors in the London office market

ABSTRACTWe investigates the sentiment-driven trading behaviour of the four types of investors in the London office market, i.e. UK institutional investors, UK private investors, UK listed real estate companies/Real Estate Investment Trust (REIT)s and overseas investors. In addition, we examine the relationship between investor sentiment and property performance. Related indices are calculated to examine the existence of herding behaviour of different investors. We find that UK private investors follow a contrarian strategy to UK institutional investors and listed real estate companies/REITs and enter/exit the market at different points of time. UK institutional investors tend to follow the sentiment of UK listed real estate companies/REITs and overseas investors with lags. There is no evidence that overseas investors rely upon the sentiment of UK specialised property investors in their decision-making. We find the sentiment of different investors is influenced differently by market fundamentals. Yield and rental growth rate have significant impact on trading activity of overseas investors, but not on other investors. The stock market return and securitised real estate return have significant impact on the trading activity of UK institutional investor and overseas investor, but have no significant influence on the trading behaviour of UK private investor and listed real estate company/REIT.

A Model of the Australian Housing Market

We build an empirical model of the Australian housing market that quantifies interrelationships between construction, vacancies, rents and prices. We find that low interest rates (partly reflecting lower world long-term rates) explain much of the rapid growth in housing prices and construction over the past few years. Another demand factor, high immigration, also helps explain the tight housing market and rapid growth in rents in the late 2000s. A large part of the effect of interest rates on dwelling investment, and hence GDP, works through housing prices.

Distributional Effects of Surging Housing Costs Under Schwabe's Law

The upward sloping trend of rents and house prices has initiated a debate on the consequences of surging housing costs for wealth inequality and welfare. We employ a frictionless two-sectoral macroeconomic model with a housing sector to investigate the dynamics of wealth inequality and the determinants of welfare. Households have non-homothetic preferences, implying that the poor choose a higher housing expenditure share, which is compatible with Schwabe’s Law. We first examine the isolated effects of increasing housing costs in partial equilibrium. The model is closed by introducing a production sector that enables us to analyze the general equilibrium consequences of a widely discussed policy option, which aims at dampening the growth of housing costs. Abolishing zoning regulations triggers a slower rent growth and reduces wealth inequality by 0.7 percentage points (measured by the top 10 percent share). Average welfare increases by 0.5 percent. The household-specific welfare effects are asymmetric. The poor benefit more than the rich, and the richest wealth decile is even worse off.

Urban Rail Transit Provides the Necessary Access to a Metropolitan Area: A Case Study of Portland, Oregon, USA

Access to good public transit for low-socioeconomic communities has been an important concern in transportation planning and urban studies research. In Portland, Oregon, USA, the rapid growth of housing prices and rents in the urban core has caused displacement of low-income residents to peripheral and suburban neighborhoods where housing is more affordable. Because public transit is generally more limited in the urban periphery and suburbs, there is concern that the low-income suburban residents may have more limited access to Portland’s light rail transit service than more affluent residents do. This study examines the relationships between the light rail transit accessibility and socioeconomic status—income, race and ethnicity—in the Portland metro area. Light rail transit accessibility is compared for all income and racial/ethnic groups across four access zones. Multinomial logistic econometric models were used to measure likelihood differences of being located in different access zones between each demographic group. The results show that there is no significant barrier for low-income and racial and ethnic minority residents to access urban rail transit in Portland. The results suggest that despite low-income residents’ movement to the suburbs, Portland’s urban rail transit system continues to serve all residents by providing cohesive connections between the urban core, periphery and suburbs.

Household tenure choice and housing price volatility under a binding home-purchase limit policy constraint

This study establishes a dynamic search-matching model with the home ownership market and rental markets unified within a single framework, against the background of China's home-purchase limit policy. We analyze the dynamic responses of household tenure choice, housing prices and market liquidity to a demographic shock. Our results show that, although the home-purchase limit policy can inhibit housing prices in the current period, the positive shock from demographic changes immediately triggers growth in rents and eventually leads to escalation in housing prices in subsequent periods.

Mortgage Supply and Housing Rents

We show that a contraction of mortgage supply after the Great Recession has increased housing rents. Our empirical strategy exploits heterogeneity in MSAs' exposure to regulatory shocks experienced by lenders over the 2010-2014 period. Tighter lending standards have increased demand for rental housing and have led to higher rents, depressed homeownership rates and an increase in rental supply. Absent the credit supply contraction, annual rent growth would have been 2.1 percentage points lower over 2010-2014 in MSAs where lending standards rose from their 2008 levels.

Modelling the asymmetric behaviour of property yields: evidence from the UK office market

This paper examines the determinants of UK office market yields and their relative importance depending on overall monetary and financial conditions, with special attention given to the role of macroeconomic liquidity. To do so, we rely on a standard linear model as well as on non-linear one that allows for a transition between two possible regimes of liquidity conditions – accommodative or tight – both models accounting for possible trend reverting behaviour. The results of the study provide new insights to the discussion on property yield modelling. Whatever the type of modelling, linear or not, we find that in addition to its traditional drivers – notably risk-free interest rate and expected rental growth – money supply is a key factor of property yields. Moreover, depending on the evolution of the ratio of M2 to GDP, property yields evolve according to two regimes; in the one depicted as a normal liquidity regime, the property yields dynamics mainly obeys an error correcting mechanism which tends to counter excessive discrepancy between property yields and their fundamental value deduced from a Present Value type model, while in the second one, this mechanism is dominated by the impact of money supply growth which can induce increasing movements in the property prices, possibly turning to bubbles.

What Accounts for the Differences in Rent-Price Ratio and Turnover Rate? A Search-and-Matching Approach

We build an on-the-house search model and show that two frequently used metrics for the housing market, the rent-to-price ratio (or rental yield) and the turnover rate, are jointly determined in equilibrium. We, therefore, estimate a simultaneous equations system on matched sale-rental pairs, as a housing unit cannot be owner-occupied and renter-occupied at the same time. We confirm that a higher turnover rate is associated with a lower rental yield. We also identify a form of “dichotomy” in empirical determinants of rental yields and turnover rates at the estate level: the demographic structure and past returns affect an estate’s turnover rate, while popularity, human capital, mortgage burdens, and long-run rent growth determine its rental yield. The robustness of our results is established through a series of tests. Our popularity index for 130 estates in Hong Kong, estate rankings, and the brand premia of major real estate developers may carry independent interests.

On the Value of Environmental Certification in the Commercial Real Estate Market

AbstractA significant part of the global carbon externality stems from the real estate sector. Environmental certification is often hailed as an effective means to resolve the information asymmetry that may prevent markets from effectively pricing the energy performance of buildings. This study analyzes the adoption and financial outcomes of environmentally certified commercial real estate over time. We document that nearly 40% of space in the 30 largest U.S. commercial real estate markets holds some kind of environmental certification in 2014, as compared to less than 5% in 2005. Tracking the rental growth of 26,212 office buildings, we measure the performance of environmentally certified real estate over time. We document that certified office buildings, on average, have slightly higher rental, occupancy and pricing levels, but do not outperform non‐certified buildings in rental growth over the 2004–2013 period. Further performance attribution analysis indicates that local climate conditions, local energy prices and the extent of certification lead to significant heterogeneity in market pricing. On aggregate, these findings provide some evidence on the efficiency of the market in the adoption and capitalization of environmental characteristics in the commercial real estate market.

The role of macro-economic indicators in explaining direct commercial real estate returns: evidence from South Africa

This study investigates the role of macro-economic indicators in explaining direct real estate returns in South Africa (SA). Literature review is conducted to identify factors that drive direct commercial real returns and the identified drivers are tested in an emerging market. The study applies SA annual commercial real estate returns including total returns, rental growth and capital growth published by the Investment Property Databank (IPD) over the past 20 years, from 1995 to 2014, as an independent variable. The most dominant and significant factors that explain total returns across all property types and provinces in South Africa are GDP, unemployment rates and interest rates which are macro-economic indicators. Our study finds key differences between the determinants of total return and change in capital values which are different from the variables which determine rental growth – the results also highlight the heterogeneity and complexity of real estate returns. These results are important for asset managers as well as government regulatory agencies to make better informed decisions in relation to factors which affect direct real estate returns in an emerging economy.

The Sharing Economy and Housing Affordability: Evidence from Airbnb

We assess the impact of home-sharing on residential house prices and rents. Using a dataset of Airbnb listings from the entire United States and an instrumental variables estimation strategy, we show that Airbnb has a positive impact on house prices and rents. This effect is stronger in zipcodes with a lower share of owner-occupiers, consistent with non-owner-occupiers being more likely to reallocate their homes from the long- to the short-term rental market. At the median owner-occupancy rate zipcode, we find that a 1% increase in Airbnb listings leads to a 0.018% increase in rents and a 0.026% increase in house prices. Considering the median annual Airbnb growth in each zipcode, these results translate to an annual increase of $9 in monthly rent and $1,800 in house prices for the median zipcode in our data, which accounts for about one fifth of actual rent growth and about one seventh of actual price growth. Finally, we formally test whether the Airbnb effect is due to the reallocation of the housing supply. Consistent with this hypothesis, we find that, while the total supply of housing is not affected by the entry of Airbnb, Airbnb listings increase the supply of short-term rental units and decrease the supply of long-term rental units.

EFFET DE L’INOCULATION ECTOMYCORHIZIENNE EN PÉPINIÈRE SUR LA CROISSANCE ET LA NUTRITION DES PLANTS DU CÈDRE DE L’ATLAS EN ALGÉRIE

La mycorhization des plants du cèdre de l’Atlas en pépinière figure parmi les approches préconisées pour améliorer la survie et la croissance des plants en site de reboisement. Cependant, la majo- rité des travaux n’ont pas pu obtenir des taux de mycorhization élevés lorsque les plants du cèdre de l’Atlas étaient inoculés par des spores. L’objectif de cette étude est de déterminer l’influence de l’inocu- lum sporal de trois champignons ectomy- corhiziens, Cortinarius cedretorum, Ama- nita vaginata et Inocybe geophylla, sur la croissance et la nutrition minérale des plantules de Cedrus atlantica. Les carpo- phores, les semences et le sol forestier organique utilisés pour la production des plants ont été prélevés sous un peuple- ment pur de cèdre de l’Atlas. L’inoculum sporal était constitué de carpophores broyés et tamisés. Après 12 mois de mise en culture, les différents paramètres de croissance ont été évalués : hauteur du plant, longueur de la racine princi- pale, nombre de racines fines, taux de mycorhization, biomasse totale, nombre d’apex mycorhizés et concentrations foliaires des éléments minéraux. Les taux de mycorhization pour les trois champi- gnons évalués ont varié entre 55 % et 65 %, ce qui est un résultat exceptionnel dans le cas de l’inoculation des plants du cèdre de l’Atlas à l’aide des spores. Les résultats ont montré que l’inoculation avec les trois champignons ectomyco- rhiziens augmente significativement les concentrations foliaires de phosphore et d’azote. La biomasse des plantules du cèdre de l’Atlas est significativement supérieure avec les trois inocula compa- rativement aux plantules témoins.