Journal of Property Investment & Finance
- Emerald Group Publishing Limited
- Publication date:
- Nbr. 38-2, December 2020
- Nbr. 38-5, December 2020
- Nbr. 38-6, October 2020
- Nbr. 38-3, September 2020
- Nbr. 38-4, September 2020
- Nbr. 38-1, November 2019
- Nbr. 37-6, September 2019
- Nbr. 37-5, August 2019
- Nbr. 37-4, July 2019
- Nbr. 37-3, April 2019
- Nbr. 37-2, March 2019
- Nbr. 37-1, February 2019
- Nbr. 36-6, September 2018
- Nbr. 36-5, August 2018
- Nbr. 36-4, July 2018
- Nbr. 36-3, April 2018
- Nbr. 36-2, March 2018
- Nbr. 36-1, February 2018
- Nbr. 35-6, September 2017
- Nbr. 35-5, August 2017
- The dynamics of listed property companies in Indonesia
Purpose: As an asset class, listed property companies (PCs) in the emerging Asian markets have taken on increased significance in recent years. Investors have seen Indonesian real estate investment trusts (REITs) being regulated to become a property investment vehicle in 2007. This sees macro-environment investment in the Indonesian property market taking off to a higher level regionally. In the background, Indonesian listed PCs maintain as one of the major investment vehicles for local and international investors. It has also been the subject of investment for REITs and property investment funds in Indonesia. The purpose of this paper is to assess the dynamics of risk-adjusted performances and portfolio diversification benefits of listed PCs in a mixed-asset portfolio context in Indonesia, from July 2006 to December 2018. The sub-periods of pre-global financial crisis (GFC), GFC and post-GFC of listed PCs is also assessed. Design/methodology/approach: Using monthly total returns, the risk-adjusted performance and portfolio diversification benefits of listed PCs from July 2006 to December 2018 are assessed, with extended efficient frontiers and asset allocation diagrams used to assess the role of listed PCs in a mixed-asset portfolio. Sub-period analyses are conducted to assess the post-GFC recovery of listed PCs. Findings: Listed PCs delivered higher returns but carried higher risks compared to stocks before the GFC, with bonds having both the lowest returns and risks. The impact of the GFC was highest for Indonesian PCs compared to stocks, where properties did not deliver strong risk-adjusted returns. Notwithstanding the poor risk-adjusted performance, Indonesian PCs had low correlations with stocks and bonds, suggesting some level of diversification potential for stock and bond investors. Stocks outperformed listed PCs across the sub-periods and the full period. Over the post-GFC period, both stocks and listed PCs recovered from the crisis, with stocks turning around stronger. This analysis shows a prolonged recovering and slow bouncing adjustment of listed PCs from the economic changes. This research suggests selected listed PCs may be the outperformers, and, a future contract as a hedge form for listed PC to be implemented. Research limitations/implications: The use of the indices of Standard & Poor’s Indonesian property total return (for listed PCs) are as follows: MSCI Indonesia total return (for stocks), Indonesia’s ten-year bond’s total return (for bonds) and Indonesia’s three-month bill total return (for cash). This is used to study the Indonesian listed PCs and may have aggregation effects in its underperformance and therefore drawing a negative outcome. The results may reflect the common fact that the majority of listed PCs in Indonesia are property developers, which also sees underperformances in other emerging country markets. Practical implications: Listed PCs have been under increasingly adjusted and positively adapted regulations from the Indonesian Government over the post-GFC period. Therefore, in order to attract interest from international investors in property investment in Indonesia, listed PCs need stronger and more efficiently adapted regulations to a competitive level of respective regulations in the region and globally. Notwithstanding the poor performance in the transitional stage, Indonesian listed PCs bring some diversification benefits to local investors who are able to pick the outperformed invested PCs at the right time. Of the on-going concerns, international investors have no restrictions on holding listed PCs in the Indonesian stock market. This provides room for improvement in business performance in listed PCs as a result of regional/global competition and international management being involved. The present study delivers awareness to investors, researchers as well as policymakers on the Indonesian property market. Originality/value: This paper is the first published to present a country profile of significant property vehicles (commercial property, listed PCs and REITs). It also presents empirical research analysis of the risk-adjusted performance of listed PCs and its dynamic role in a local investors’ perspective across the pre-GFC, GFC, post-GFC periods. Given the significance of listed PCs in Asia, this research highlights more information for opportunities and on-going property investment issues in Indonesia.
- International capital movement towards the Spanish real estate sector
Purpose: The purpose of this paper is to examine the determinants that affect international capital flows (ICF) toward the Spanish real estate market over the period 1995 first quarter to 2017 fourth quarter. Design/methodology/approach: VECM methodology is used to analyze time series and panel methods using pooled EGLS regression. Findings: VECM parameter results for construction and real estate activities sectors, quickly suggesting a stable performance of capital flows toward Spanish real estate sector that the short-term fluctuation of foreign investment results contributes to the long-term equilibrium relatively soon. By applying the Monetary theory of Johnson, the model identifies a relevant role of M3 explaining capital flows to real estate, together with the lagged variables of construction and real estate activities capital flows, Spanish real interest rate and Spain’s economic growth rate; they are the significant determinants on capital movement to Spanish real estate sector. Interestingly, Spanish housing prices as an exogenous variable, directly, significantly and negatively affect real estate capital flows in all cases as a way to capture the assets price bubble. Practical implications: Findings highlight reasons affecting capital flows to real estate and construction activities to Spanish sectors which allow capital Funds to take into account those drivers in their investment decisions. Originality/value: This paper is the first attempt to analyze the determinants of ICF to Spanish real estate market; it has a significant meaning for both Spanish economy and international investors.
- Pricing risk and its use in modelling real estate market yields
Purpose: In the light of past financial and economic turmoil, there has been a marked increase in the volatility in real estate markets. This has impacted on the pricing of property assets, partly through market sentiment and particularly concerning risk. It also limits modelling accuracy model accuracy. The purpose of this paper is to create a new variable and model to enhance analysis of what drives real estate yields incorporating market sentiment to risk. Design/methodology/approach: This paper specifically considers the modelling of property pricing within a volatile economic environment. The theoretical context begins by analysing the relationship between property yields and government bonds. The analytical context then moves on to specifically include a measurement of risk which stresses its role and importance in investment markets since the Global Financial Crisis. The model thus incorporates macroeconomic and real estate data, together with an international risk multiplier, which is calculated within the paper. Findings: The paper finds the use of measurements of market sentiment and risk are more powerful tools for modelling yields than previous techniques alone. Research limitations/implications: This is an initial paper outlining the creation of sentiment and risk measurements in the financial market and showing an example of its application to a commercial real estate market. The implication is that this could add a major new explanatory variable to modelling of yields. Practical implications: The paper highlights the importance of risk in the pricing of commercial real estate, over and above normal variables. It highlights how this can help explain over and undershooting of yields within commercial real estate which would be of great importance in the investment world. Originality/value: This paper attempts to explicitly measure market sentiment, pricing of risk and how this impacts real estate pricing.
- Determinants of foreign and domestic non-listed real estate fund flows in India
Purpose: Real estate forms an important part of any economy and the investment in real estate, in turn, is impacted by the macroeconomic environment of that country. The purpose of the present research is to examine macroeconomic determinants of foreign and domestic non-listed real estate fund (NREF) flows and to examine whether they are similar or different for an emerging economy like India. Design/methodology/approach: The long and short-run cointegration between the time-series variables is estimated using the autoregressive distributed lag (ARDL) bounds test and error correction model (ECM) using quarterly data across the 2005–2017 period. ARDL is a suitable method for short time-series data. Findings: The empirical results indicate that domestic NREF flows are positively and significantly impacted by real GDP and performance of listed real estate stocks (i.e. BSE realty index). Whereas, foreign NREF flows are positively and significantly impacted by the exchange rate, performance of listed real estate stocks and domestic NREF flows. Practical implications: The empirical results have significant implications for academicians, policy makers and real estate market practitioners. In the context of these results, some interesting insights are gained that would help in the implementation of the policies aimed toward increasing the fund flows in the real estate sector, which in turn would have a significant trickle-down effect on the Indian economy. Originality/value: The existing literature looks at macroeconomic and other drivers of foreign investment in international real estate investments. However, there are very few studies on the determinants of domestic real estate investment flows and on determinants of NREFs' investment flows; particularly in emerging markets. The present study, in contrast, evaluates simultaneously the macroeconomic determinants of the domestic and foreign NREFs' investment flows in India. The ARDL and ECM method used has been applied for the first time to the study of NREFs.
- Property futures—the art and science of strategic foresight
Purpose: The study aims to discuss the role of strategic foresight in determining and mapping possible property futures. In particular, the briefing will explore the importance of determining alternative futures and creating scenarios to help determine a flexible and adaptable strategy. Design/methodology/approach: This education briefing is an overview of property futures and strategic foresight. Findings: This is an education briefing of existing knowledge. Practical implications: Strategic foresight provides a framework and structure by identifying a focal point that looks at alternative futures and a preferred future that feed into the implementation of a strategic plan. Originality/value: This is a review of existing models.
- The added-value role of industrial and logistics REITs in the Pacific Rim region
Purpose: As significant listed property investment vehicles, industrial and logistics REITs (I&L REITs) have recently enhanced their property portfolios, often replacing the traditional industrial properties with logistic properties to gain strategic exposure to recent e-commerce trends. This paper aims to assess the investment performance of I&L REITs by assessing the significance, risk-adjusted performance and portfolio diversification benefits of I&L REITs in the Pacific Rim region from July 2011 to December 2018. The strategic property investment implications for I&L REITs are also identified. Design/methodology/approach: Monthly total returns from July 2011 to December 2018 were used to analyse the risk-adjusted performance and portfolio diversification benefits for I&L REITs in the United States, Japan, Australia and Singapore. An asset allocation diagram was employed to assess the strategic role of I&L REITs in a mixed-asset portfolio in each case. Findings: I&L REITs generally possessed superior average annual returns compared with the other sub-sector REITs, stocks and bonds in the United States, Japan, Australia and Singapore between July 2011 and December 2018, with desirable portfolio diversification benefits. Importantly, a more significant role for I&L REITs was generally observed in the mixed-asset portfolio compared to the other sub-sector REITs in each of these four markets across the broad portfolio risk spectrum. This reflects I&L REITs delivering enhanced portfolio returns and offering portfolio diversification benefits in a mixed-asset portfolio in the United States, Japan, Australia and Singapore. Practical implications: Property investors, particularly property securities funds (PSFs) and income-oriented investors, should consider including I&L REITs in their mixed-asset portfolios, as Pacific Rim–based I&L REITs provided an attractive REIT investment sub-sector, co-existing alongside the other sub-sector REITs and major asset classes in a mixed-asset portfolio in a Pacific Rim context, as well as being a portfolio diversifier. These results confirm the added-value and strategic role of I&L REITs in a mixed-asset portfolio, seeing I&L REITs as an effective investment pathway for I&L property exposure in the Pacific Rim region. Originality/value: This is the first study to assess the investment performance of I&L REITs in the Pacific Rim region, evaluating their significance, risk-adjusted performance and portfolio diversification benefits, and the role of I&L REITs in a mixed-asset portfolio in the United States, Japan, Australia and Singapore. More importantly, this research is the first paper to provide empirical evidence on I&L REITs, which have often transformed their traditional industrial property portfolios with increased levels of logistics property to gain exposure to recent e-commerce trends. This research enables more informed and practical property investment decision-making regarding I&L REITs and their added-value and strategic role in a mixed-asset portfolio, as well as delivering effective I&L property exposure in the Pacific Rim region, with the added benefits of liquidity, transparency and fiscal efficiency.
- A comparison of the forecasting ability of ARIMA models
Purpose: ARIMA models have been extensively examined in the context of the real estate market. The purpose of this paper is to examine issues relating to their application in a forecasting context. Specifically, the paper seeks to examine whether in‐sample measures of best‐fit and also past...
- Aborted property transactions: seller under‐compensation in the absence of legal recourse
Property purchasers who rescind on their contracts and forfeit the initial deposits are exercising their right to not proceed with the purchase. The deposit to purchase endows on the buyer an implicit call option that is valuable and the value exceeds the face value of the deposit. As such, real...
- An empirical investigation of agency relationships and capital structure of property management firms in the UK
This study examines the relationship between various agency factors and debt of property management firms in the UK. Findings indicate that debt is significantly inversely related to percentage of shares closely held, dividend yield and price‐to‐book ratio. Size, measured by sales volume, appears...
- Appraising property with rough set theory
This research is focused on a methodology created to analyse imprecise information, that is full of attributes defined as “rough set”. The methodology will be then applied to the real estate appraisal question, representing a further possible method of evaluation. Up to now the main approaches to...
- Bank lending valuations on commercial property – Does European mortgage lending value add anything to the process?
This paper reviews a number of alternative bases of valuation which can be applied for lending purposes. In early 1999, the European Mortgage Federation suggested that the philosophy of a European Mortgage Lending Value (EMLV) should be based on “sustainable” values and this recommendation is...
- Capital structure and profitability of the property and construction sectors in Hong Kong
This paper examines the inter‐relationship between profitability, cost of capital and capital structure among property developers and contractors in Hong Kong. Whilst major indigenous local developers are among the largest and the most profitable in the world, their contractor counterparts are...
- Commercial property tax in the UK: business rates and rating appeals
Purpose: The purpose of this paper is to investigate the impact of the introduction of the business rates retention scheme (BRRS) in England which transferred financial liability for backdated appeals to LAs. Under the original scheme, business rates revenue, mandatory relief and liability for...
- Conceptual framework for real estate transactions. What risk metrics are needed as decision support system? Considerations for German market participants
Purpose: The purpose of this paper is the development for a conceptual framework with regard to the risk management of real estate positions as foundation for transaction decisions. In this context, the current market environment and legal obligations are the main drivers for market participants to ...
- Crossing the great divide?. A survey of US and UK real estate journals
This study examines the issue of cross‐continental publishing in real estate research to understand the research interaction between the two major English‐speaking countries and to determine if a home bias exists. This study also determines the extent to which authors from other countries publish...
- Differences in underpricing of A-REIT IPOs and Australian property company IPOs
Purpose: – A variety of papers have analyzed the underpricing of REIT IPOs or property company IPOs. The purpose of this paper is to compare the two sectors and examines differences in the underpricing of the two types of IPOs. Design/methodology/approach: – An OLS regression is used to identify...