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Journal of European Real Estate Research
Journal Prestige (SJR): 0.268  Citation Impact (citeScore): 1 Number of Followers: 5  Hybrid journal * Containing 5  Open Access article(s) in this issue *ISSN (Print) 1753-9269 - ISSN (Online) 1753-9277 Published by Emerald  [362 journals]
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- Strategic vendor due diligence in real estate transactions
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Authors: Grazyna Aleksandra Wiejak-Roy
Abstract: In light of the ever-growing complexity of real estate transactions, the need for vendors and buyers to better understand the role of vendor due diligence (VDD) is imperative. The purpose of this paper is twofold: firstly, it provides a detailed literature review regarding the role of VDD from both the vendor's and buyers' perspectives. Secondly, it analyses the value of VDD over and above the buyer's due diligence (BDD) in real estate transactions by proposing a theoretical model involving two-stage auctions. Real-world examples from the industry are used as a motivation behind listing a set of practical questions. A theoretical construct is built to approximate the real estate environment under study. The construct is then studied from a game-theoretic perspective to obtain theoretical answers to the questions. These answers are then used to shape recommendations for the relevant industry and beyond. The model suggested accommodates the feature that even though the VDD is broadly increasing informational efficiency in the market, its value is limited and sometimes harmful when the vendors have a sound prior understanding of their assets and the buyers' pre-transaction information about the asset is already high. Though the real estate market is considered here, the theoretical model we propose is applicable to any other complex asset transaction decision that supports endogenous information disclosure considerations using VDD.
Citation: Journal of European Real Estate Research
PubDate: 2022-08-22
DOI: 10.1108/JERER-04-2022-0012
Issue No: Vol. ahead-of-print, No. ahead-of-print (2022)
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- What property attributes are important to UK university students in their
online accommodation search'-
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Authors: Olayiwola Oladiran, Adesola Sunmoni, Saheed Ajayi, Jiarong Guo, Muhammad Azeem Abbas
Abstract: This paper examines the categories of property attributes that are important to UK university students in their online accommodation search. It also analyses the volume of information displayed regarding the property attributes and explores the influence of some of the information provided on the attractiveness and by extension, the booking potential of the property. The authors use data from an online student accommodation listing platform – student.com – which contain tangible and non-tangible property attributes, and the data are analysed using a hedonic regression model. The results show that purpose-built student accommodation's (PBSA) tangible and intangible attributes are important to students in their online accommodation search, although, these attributes vary in impact. The study also reveals that failure to display key information of a PBSA may reduce the attractiveness of the property. The empirical evidence on student accommodation ex ante preferences and choices is limited, particularly as it relates to online accommodation search in a UK context. The authors' approach to identify the application of the search theory to the student accommodation search process is particularly unique.
Citation: Journal of European Real Estate Research
PubDate: 2022-07-06
DOI: 10.1108/JERER-03-2021-0019
Issue No: Vol. ahead-of-print, No. ahead-of-print (2022)
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- Institutional factors and the timing of land development: a survival
analysis applied to the GZM Metropolis in Poland
Open Access Article-
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Authors: Katarzyna Reyman, Gunther Maier
Abstract: The purpose of the article is to improve the understanding of the role of institutional factors in real estate development. The authors take into account zoning (existence and type), type of right of disposal and type of buyer and seller of property in a multivariate econometric estimation. Dependent variable of the analysis is the time between acquisition of empty land and the application for a building permit, a period when many important development decisions have to be made. This indicator is closely related to debated phenomena like land hording and speculation. The authors estimate a Cox proportional hazard model with the time between acquisition and application for a building permit as dependent variable and institutional indicators and a number of control variables as explanatory variables. Study area is the GZM Metropolis in the South of Poland. This region shows enough variability in institutional arrangements to allow for this type of analysis. The analysis shows that institutional factors significantly influence the real estate development process. In areas that have not issued a zoning plan, the period until the building permit application is significantly longer. When the state is involved in a transaction (as purchaser or seller), it also takes longer until the building permit application is submitted. Although the instrument is usually intended to speed up development, perpetual usufruct implies a longer period until building permit application. Because of the results the authors get for control variables and for robustness checks, the authors are confident of the results of the analysis. To the authors’ knowledge, this is the first study that deals with the question how institutional factors influence the timing of real estate development. By using data for a region in Poland, the authors also add to knowledge about real estate development in CEE countries.
Citation: Journal of European Real Estate Research
PubDate: 2022-03-15
DOI: 10.1108/JERER-04-2021-0021
Issue No: Vol. ahead-of-print, No. ahead-of-print (2022)
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- The housing cycle as shaped by prices and transactions: a tentative
application of the honeycomb approach for Italy (1927–2019)
Open Access Article-
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Authors: Elisabetta Marzano, Paolo Piselli, Roberta Rubinacci
Abstract: The purpose of this paper is to provide a dating system for the Italian residential real estate market from 1927 to 2019 and investigate its interaction with credit and business cycles. To detect the local turning point of the Italian residential real estate market, the authors apply the honeycomb cycle developed by Janssen et al. (1994) based on the joint analysis of house prices and the number of transactions. To this end, the authors use a unique historical reconstruction of house price levels by Baffigi and Piselli (2019) in addition to data on transactions. This study confirms the validity of the honeycomb model for the last four decades of the Italian housing market. In addition, the results show that the severe downsizing of the housing market is largely associated with business and credit contraction, certainly contributing to exacerbating the severity of the recession. Finally, preliminary evidence suggests that whenever a price bubble occurs, it is coincident with the start of phase 2 of the honeycomb cycle. To the best of the authors’ knowledge, this is the first time that the honeycomb approach has been tested over such a long historical period and compared to the cyclic features of financial and real aggregates. In addition, even if the honeycomb cycle is not a model for detecting booms and busts in the housing market, the preliminary evidence might suggest a role for volume/transactions in detecting housing market bubbles.
Citation: Journal of European Real Estate Research
PubDate: 2022-03-14
DOI: 10.1108/JERER-02-2021-0011
Issue No: Vol. ahead-of-print, No. ahead-of-print (2022)
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- Influence of the global environment on capital flows in the London Office
market-
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Authors: Olawumi Fadeyi, Stanley McGreal, Michael J. McCord, Jim Berry, Martin Haran
Abstract: The London office market is a major destination of international real estate capital and arguably the epicentre of international real estate investment over the past decade. However, the increase in global uncertainties in recent years due to socio-economic and political trends highlights the need for more insights into the behaviour of international real estate capital flows. The purpose of this study is to evaluate the influence of the global and domestic environment on international real estate investment activities within the London office market over the period 2007–2017. This study adopts an auto-regressive distributed lag approach using the real capital analytics (RCA) international real estate investment data. The RCA data analyses quarterly cross-border investment transactions within the central London office market for the period 2007–2017. The study provides insights on the critical differences in the influence of the domestic and global environment on cross-border investment activities in this office market, specifically highlighting the significance of the influence of the global environment in the long run. In the short run, the influence of factors reflective of both the domestic and international environment are important indicating that international capital flows into the London office market is contextualised by the interaction of different factors. The authors provide a holistic study of the influence of both the domestic and international environment on cross-border investment activities in the London office market, providing more insights on the behaviour of global real estate capital flows.
Citation: Journal of European Real Estate Research
PubDate: 2022-01-12
DOI: 10.1108/JERER-05-2021-0029
Issue No: Vol. ahead-of-print, No. ahead-of-print (2022)
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- Editorial: From macro to micro analysis: new findings from real estate
markets in Europe-
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Authors: Paloma Taltavull
Abstract: Editorial: From macro to micro analysis: new findings from real estate markets in Europe
Citation: Journal of European Real Estate Research
PubDate: 2022-10-17
DOI: 10.1108/JERER-11-2022-069
Issue No: Vol. 15, No. 3 (2022)
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- Buyer behaviour and price expectations: a spatial analysis of the Athens
residential market-
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Authors: Michael White, Dimitrios Papastamos
Abstract: This paper examines the price setting behaviour over time and space in the Athens residential market. In periods of house price inflation asking prices are often based upon the last observed highest selling price achieved for a similar property in the same micro-location. However, in a falling market, prices may be rigid downwards and less sensitive to the most recent transaction prices, weakening spatial effects. Furthermore, the paper considers whether future price expectations affect price setting behaviour. The paper employs a dataset of approximately 24,500 property values from 2007 until 2014 in Athens incorporating characteristics and locational variables. The authors begin by estimating a baseline hedonic price model using property characteristics, neighbourhood amenities and location effects. Following this, a spatio-temporal autoregressive (STAR) model is estimated. Running separate models, the authors account for spatial dependence from historic valuations, contemporaneous peer effects and expectations effects. The initial STAR model shows significant spatial and temporal effects, the former remaining important in a falling market contrasting with previous literature findings. In the second STAR model, whilst past sales effects remain significant although smaller, contemporaneous and price expectations effects are also found to be significant, the latter capturing anchoring and slow adjustment heuristics in price setting behaviour. As valuations used in the database are based upon comparable sales, then in the recessionary periods covered in the dataset, finding comparables may have become more difficult, and hence this, in turn, may have impacted on valuation accuracy. In addition to past effects, contemporaneous transactions and expected future values need to be taken in consideration in analysing spatial interactions in housing markets. These factors will influence housing markets in different cities and countries. The information content of property valuations should more carefully consider the relative importance of different components of asking prices. This is the first paper to use transactions data over a period of falling house prices in Athens and to consider current and future values in addition to past values in a spatio-temporal context.
Citation: Journal of European Real Estate Research
PubDate: 2022-09-16
DOI: 10.1108/JERER-03-2020-0013
Issue No: Vol. 15, No. 3 (2022)
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- Identifying how the time on the market affects the selling price: a case
study of residential properties in Paphos (Cyprus) urban area
Open Access Article-
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Authors: Philippos Nikiforou, Thomas Dimopoulos, Petros Sivitanides
Abstract: The purpose of this study is to investigate how the degree of overpricing (DOP) and other variables are associated with the time on the market (TOM) and the final selling price (SP) for residential properties in the Paphos urban area. The hedonic pricing model was used to examine the association of TOM and SP with various factors. The association of the independent variable of DOP and other independent variables with the two dependent variables of TOM and SP were investigated via ordinary least squares (OLS) regression models. In the first set of models the dependent variable was TOM and in the second set of models the dependent variable was SP. A sample of N = 538 completed transactions from Q1 2008 to Q2 2019 was used to estimate the optimum DOP that a seller must apply on the current market value of a property in order to achieve highest SP price in the shortest TOM. The results of this study also suggest that the degree of overpricing in thin and less transparent markets is higher than that in transparent markets with high property transaction volumes. In mature markets like the USA and the UK where the actual sold prices are published, the DOP is around 1.5% which is much lower than the 11% DOP identified in this study. It was found that buyers are willing to pay more for the same house in a bigger plot than a bigger house in the same plot. The outcome is that smaller houses sell faster at a higher price per square meter than larger houses. Smaller houses are more affordable than larger houses. There is a large pool of buyers for smaller houses than bigger houses. Higher demand for smaller houses results in a higher price per square meter for smaller houses than the price per square meter for bigger houses. Respectively the TOM for smaller houses is shorter than the TOM for bigger houses. The database used is unique, from an estate agent located in Paphos that managed to sell more than 27,000 properties in 20 years. This data set is the most accurate information for Cyprus' property transactions.
Citation: Journal of European Real Estate Research
PubDate: 2022-08-05
DOI: 10.1108/JERER-11-2021-0051
Issue No: Vol. 15, No. 3 (2022)
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- Drivers behind the accuracy of self-reported home valuations: evidence
from an emerging economy-
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Authors: Mateusz Tomal
Abstract: This paper aims to explore the drivers behind the accuracy of self-reported home valuations in the Warsaw (Poland) housing market. In order to achieve the research goal, firstly, unique data on subjective residential property values estimated by their owners were compared with market-justified ones. The latter was calculated using geographically weighted regression, which allowed for taking into account spatially heterogeneous buyers' housing preferences. An ordered logit model was then used to identify the factors influencing the probability of the occurrence of bias towards over or undervaluation. The results of the study revealed that, on average, homeowners overvalued their properties by only 1.94%, and the fraction of interviewees estimating their properties accurately ranges from 20% to 68%, depending on the size of the margin of error adopted. The drivers of the valuation bias variation were the physical, locational and neighbourhood attributes of the property as well as the personal characteristics of the respondents, for which their age and employment situation played a key role. In contrast to previous studies, this is the first to examine drivers behind the accuracy of self-reported home valuations in a Central and Eastern Europe country. In addition, this work is the first to consider heterogeneous housing preferences when calculating objective property values.
Citation: Journal of European Real Estate Research
PubDate: 2022-07-20
DOI: 10.1108/JERER-02-2022-0004
Issue No: Vol. 15, No. 3 (2022)
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- House price dynamics in Iberian Metropolitan Statistical Areas: slope
heterogeneity, cross-sectional dependence and elasticities-
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Authors: António M. Cunha, Júlio Lobão
Abstract: This paper studies the dynamics and elasticities of house prices in Spain and Portugal (Iberia) at the Metropolitan Statistical Area (MSA) level, addressing panel regression problems such as heterogeneity and cross-sectional dependence between MSA. The authors develop a two steps study. First, five distinct estimation methodologies are applied to estimate the long-term house price equilibrium of the Iberian MSA house market: Mean Group (MG), Fully Modified Ordinary Least Square (FMOLS) MG (FMOLS-MG), FMOLS Augmented MG (FMOLS-AMG), Common Correlated Effects MG (CCEMG) and Dynamic CCEMG (DCCEMG). FMOLS-AMG is found to be the best estimator for the long-term model. Second, an additional five distinct estimation methodologies are applied to estimate the short-term house price dynamics using the long-term FMOLS-AMG estimated price in the error-correction term of the short-term dynamic house price model: OLS Fixed Effects (FE), OLS Random Effects (RE), MG, CCEMG and DCCEMG. DCCEMG is found to be the best estimator for the short-term model. The results show that in the long run Iberian house prices are inelastic to aggregate income (0.227). This is a much lower elasticity than what was previously found in US MSA house price studies, suggesting that there are other factors explaining Iberian house prices. According to our study, coastal MSA presents an inelastic housing supply and a price to income elasticity close to one, whereas inland MSA are shown to have an elastic supply and a non-significant price to income elasticity. Spatial differences are important and cross-section dependence is prevalent, affecting estimates in conventional methodologies that do not account for these limitations, such as OLS-FE and OLS-RE. Momentum and mean reversion are the main determinants of short-term dynamics. Recent econometric advances that account for slope heterogeneity and cross-section dependence produce more accurate estimates than conventional panel estimation methodologies. The results suggest that house markets should be analyzed at the metropolitan level, not at the national level and that there are significant differences between short-term and long-term house price determinants. To the best of the authors' knowledge, this is the first study applying recent econometric advances to the Iberian MSA house market.
Citation: Journal of European Real Estate Research
PubDate: 2022-07-05
DOI: 10.1108/JERER-02-2022-0005
Issue No: Vol. 15, No. 3 (2022)
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- The occupational life cycle of real estate brokers: a cohort study
Open Access Article-
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Authors: Martin Ahlenius, Björn Berggren, Tommy Gerdemark, Jonas Kågström, Lars-Johan Åge
Abstract: The purpose of this article is to describe and analyze the occupational life cycle of Swedish real estate brokers. Voluntary turnover among real estate brokers could lead to occupational turnover and/or employee turnover and has been described as problematic by both practitioners and researchers alike. Most previous studies focusing on this issue have explored connections between real estate brokers' personality, economic and market conditions and turnover. Employee turnover involves shifting jobs within the profession (real estate brokerage), whereas occupational turnover concerns movement to a job not related to the real estate brokerage profession. Both perspectives on turnover are however lacking data about the average time spent as a broker. This study fills this gap by exploring real estate brokers' life cycle through data analysis using a cohort study consisting of a sample of 5,304 real estate brokers registered and/or deregistered over a ten-year period from 2010 to 2019. The analysis show that the decline is almost linear, resulting in 50% of the newly registered real estate brokers remain in the occupation eight years after registration. These findings are not in line with previous assumptions as the real estate brokers' life cycle is substantially longer. The results also reveal that there are differences in life cycles due to gender and year of registration. The analysis of longitudinal, aggregated data on the life cycle of real estate brokers is highly relevant as it serves as a point of reference for future longitudinal studies analyzing the motives for leaving the occupation.
Citation: Journal of European Real Estate Research
PubDate: 2022-06-28
DOI: 10.1108/JERER-01-2022-0001
Issue No: Vol. 15, No. 3 (2022)
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- Does size matter' Is there an optimal size for tenant–owner
associations'
Open Access Article-
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Authors: Peter Karpestam, Peter Palm
Abstract: The authors investigate how prices of condominiums are affected by the size of the tenant-owner associations that they belong to. The authors use data of sold apartments in the Swedish municipality Malmö 2013–2018 and estimate hedonic price regressions. The authors also perform semi-structured interviews with three senior professionals in real estate companies. The authors find significantly negative relationships between the prices of condominiums and the size of tenant-owner associations. Also, regression results indicate that associations should be no smaller than 6–10 apartments. The interviews support that associations should not be too small or too big. The lower and upper limit was suggested by the respondents to 40–50 and 80–150 apartments, respectively. In these ranges, economies of scale can be achieved, and residents will not lose the sense of community and responsibility. The authors do not prove causality. Smaller associations may have relatively exclusive common amenities, about which we lack data. The same relationships may not exist in different market conditions. The authors are not aware of previous studies with the same research question. The size of tenant-owner associations may affect the price through different channels. First, several of the banks in Sweden do not always grant mortgages for condominiums that belong to small associations. Second, larger associations may have better economies of scale and more efficient property management. Third, homeowners may prefer smaller tenant-owned associations, because they may feel less anonymous and provide more influence on common amenities.
Citation: Journal of European Real Estate Research
PubDate: 2022-06-06
DOI: 10.1108/JERER-09-2021-0048
Issue No: Vol. 15, No. 3 (2022)
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- Modelling credit spreads on commercial mortgage loans
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Authors: Sotiris Tsolacos, Nicole Lux
Abstract: This paper offers empirical evidence on factors influencing credit spreads on commercial mortgage loans. It extends existing work on the pricing of commercial mortgage loans. The authors examine the relative significance of a range of factors on loan pricing that are lender, asset and loan specific. The research explores and quantifies the sources of spread differentials among commercial mortgage loans. The paper contributes to a limited literature on the subject and serves the purpose of price discovery in commercial property lending. It offers a framework to compare actual pricing with fundamental-based estimates of loan spreads. Panel analysis is deployed to examine the cross-section and time-series determinants of commercial mortgage loan margins and credit spreads. Using an exclusive database of loan portfolios in the United Kingdom (UK), the panel analysis enables the authors to analyse and quantify the impact of a number of theory-consistent and plausible factors determining the cost of lending to commercial real estate (CRE), including type and origin of lender, loan size, loan to value (LTV) and characteristics of asset financed – type, location and grade. Spreads on commercial mortgages and, therefore, loan pricing differ by the type of lender – bank, insurance company and debt fund. The property sector is another significant risk factor lenders price in. The LTV ratio has increased in importance since 2012. Prior to global financial crisis (GFC), lenders made little distinction in pricing different LTVs. Loans secured in secondary assets command a higher premium of 50–60bps. The analysis establishes an average premium of 35bps for loans advanced in regions compared to London. London is particularly seen a less risky region for loan advancements in the post-GFC era. The study considers the role of lender characteristics and the changing regulation in the pricing of commercial mortgage loans and provides a framework to study spreads or pricing in this market that can include additional fundamental influences, such as terms of individual loans. The ultimate aim of such research is to assess whether mortgage loans are correctly priced and spotting risks emanating from actual loan spreads being lower than fundamental-based spreads pointing to tight pricing and over-lending. The analysis provides evidence on lender criteria that determine the cost of loans. The study confirms that differences in regulation affect loan pricing. The regulatory impact is most visible in the increased significance of LTV. In that sense, regulation has been effective in restricting lending at high LTV levels. The paper exploits a database of a commercial mortgage loan portfolio to make loan pricing more transparent to the different types of lender and borrowers. Lenders can use the estimates to assess whether commercial loans are fairly priced. Borrowers better understand the relative significance of risk factors affecting margins and the price they are charged. The results of this paper are of value to regulators as they can assist to understand the determinants of loan margins and gauge conditions in the lending market.
Citation: Journal of European Real Estate Research
PubDate: 2022-05-10
DOI: 10.1108/JERER-04-2021-0022
Issue No: Vol. 15, No. 3 (2022)
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- Comovements and spillovers in international commercial and
residential real estate markets-
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Authors: N. Kundan Kishor
Abstract: This study aims to know to what extent do the commercial and residential estate markets move together in different economies' Do the shocks originating in one of these markets spillover to the other markets' The authors apply a modified version of the dynamic factor model to commercial and residential real estate prices in the Euro area, Hong Kong, Singapore and the USA. This modified dynamic factor model decomposes price growth in these two real estate markets into common, spillover and idiosyncratic components. The results show significant heterogeneity in the relative importance of different components in the evolution of commercial and residential price growth across different economies. The findings suggest that the spillover from the residential to commercial real estate market dominates the spillover from the commercial to real estate market for all the economies in our sample. The authors also find that the common component accounts for a large fraction of the price movements in the residential markets in the European Union (EU) area and the USA, whereas spillover and common components together explain more than two-thirds of the variations in Hong Kong and Singapore. The results suggest that the role of spillover from one market to another increased significantly during the financial crisis of 2008–2009. This paper contributes to the existing literature on how the transmission of shocks takes place across commercial and residential real estate markets. The transmission of shocks can take place in two directions in the proposed framework. There may be a direct spillover from a shock from one market to another. This corresponds to a shock to the idiosyncratic component affecting the other idiosyncratic component. In this paper, the authors are mainly interested in indirect spillover where the shock would transmit from the idiosyncratic factor to the common factor, and then from the common factor to the other idiosyncratic factor.
Citation: Journal of European Real Estate Research
PubDate: 2022-03-22
DOI: 10.1108/JERER-07-2021-0037
Issue No: Vol. 15, No. 3 (2022)
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- Hijacking the auction – seller's or buyer's curse'
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Authors: Marte Flått, Jon Olaf Olaussen, Are Oust, Ole Jakob Sønstebø
Abstract: This paper aims to investigate the likelihood and price effects of auction hijacking – transactions conducted before a planned auction – in the residential real estate market. Using a sample of 84,203 residential properties in Oslo, Norway for the period 2007–2017, the authors employ a probit sales choice model to study the likelihood of auction hijacking and hedonic models, fixed effects models and propensity score matching to investigate the price effects. The authors find that auction hijacking is more likely to occur in periods of higher market activity and that hijacked auction properties sell at a premium of approximately 4% compared with properties sold at regularly conducted auctions. One possible explanation for the premium could be that risk aversion among buyers leads to a higher likelihood of hijacking offers and higher prices due to the risk reduction premium that sellers can extract. For most households, buying a home is an investment of great economic significance, and understanding the different aspects of the auction is paramount for both buyers and sellers. Policymakers need to be aware of the market effects from auction hijacking and determine whether restrictions should be introduced.
Citation: Journal of European Real Estate Research
PubDate: 2022-03-21
DOI: 10.1108/JERER-07-2021-0039
Issue No: Vol. 15, No. 3 (2022)
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