The role of task complexity in valuation errors analysis in a developing real estate market

The real estate valuation literature on sub-Saharan Africa (SSA) shows a growing concern over valuation errors, especially wide variation in valuations. Although there have been increased business and investment activities in the last decade or more in the region, these valuation errors pose a challenge to the maturity of SSA real estate markets as valuations promote transparency and support efficient operation of property markets. Based on archival and survey data, as well as insights from the task complexity discourse, this study examines the extent of variations in valuations and the effect of complex valuation tasks on the levels of the variations in Ghana. The study finds high levels of variations in valuation opinions of 33.6–63% for the archival and survey data, respectively. These levels of variations are substantially higher than have been reported in the literature for advanced markets suggesting that the concerns of valuation errors in SSA may be well grounded. Consistent with theory, it is further established that variations in valuation opinions may be more pronounced in comparatively more complex assignments. These findings have several implications including possible loss of confidence of market players in valuations, heightening of market uncertainty and increase in transaction costs.     

Corporate real estate,stock market valuation and the reputational effects of eco-certification

Improving the energy efficiency of retail stores has become an important strategy for retailers. However, why do some retailers obtain Energy Star certification for their stores while others do not? We argue that retailers pursue this certification to capture reputational benefits of the Energy Star label when their stock market valuation is low. Using longitudinal data for US retailers (grocery and department stores) over the period of 2002 to 2014, we find that stock market valuation measured by Tobin’s Q explains (1) the likelihood of a retailer obtaining Energy Star certification and (2) the share of Energy Star-certified stores in a retailer’s portfolio. Operating expenses on the other hand do not appear to drive the decision to obtain Energy Star certification. Our results also suggest that the motivations of retailers to obtain LEED and Energy Star certification differ.     

An examination of the seasonality in industrial real estate construction

Summary

Though some work has been done to identify variables affecting seasonal variation in detached housing, almost nothing has been done to identify the factors affecting seasonal variations in industrial real estate construction. This paper attempts to identify some of these seasonal factors and their influence on industrial real estate construction. A Chow Test shows that there is a significant difference in the relationship between the amount of industrial real estate put in place and specific economic variables.     

防洪工程对沿江(河)房地产价值的影响

研究防洪工程对沿江（河）房地产价值的影响，认为防洪工程建设可以保障周边地区安全，改变土地利用性质，有利于保护和改善水质、水环境，有利于城市的绿化美化和旧城改造，挖掘城市历史文化资源和旅游资源，增强防洪区城镇区位优势。在此基础上建立防洪工程对沿江（河）房地产影响价值的量化模型，最后运用德尔菲法以长江中下游M市为例探求该模型的求解思路。     

Refining the real estate pricing model

Investment theory dictates that capitalisation (cap) rates for freehold real estate should be determined by the risk-free nominal rate of return plus the risk premium (RP) less the expected growth rate, with an allowance for depreciation. However, importing the concept of the RP from the capital markets fails to guide investors through the complexities of the asset, or enable exploration of purchaser preferences and behaviour. A refined pricing model for real estate is proposed, based on a concept termed a risk scale, to distinguish between macro (market) and micro (stock) determinants of risk and growth within the RP. This pricing model is estimated for a major global investment market, using a cross-sectional inter-temporal framework, with a data-set of 497 transactions in the London office sector over 2010 Q2–2012 Q3. Average cap rates are estimated at just over 5%, with asset-specific attributes dominating yield determination, with submarket quality and tenant covenant most important; and unexpired term insignificant, surprising during the ‘flight to safety’ characterising the period. International investors bought at lower cap rates, despite the ongoing economic and financial instability of the study period. Improving understanding of pricing behaviour and market transparency is important and may be advanced through the pricing model.     

Forecasting real estate prices in Germany: the role of consumer confidence

The aim of the paper is to analyse the forecasting ability of various potential predictors for real estate prices in Germany over the short term. In the wake of the financial crisis, real estate prices in Germany started to increase markedly and still did so by the end of 2013. Despite a number of fundamental reasons, e.g. favourable lending conditions and Germany’s rapid return to economic growth, this provoked a discussion on whether consumers have too gloomy expectations regarding real estate prices in future. To capture the role of expectations for predicting real estate prices, in our forecast evaluation, we put special emphasis on various components of consumer confidence. Using single indicator models, we find that households’ perceived financial situations as well as their intended consumption/saving plans serve as valuable real estate price predictors.     

大连市房地产开发资金来源与价格波动关系研究

基于大连市当前快速上涨的房价问题,根据大连市2004-2012年房地产开发资金来源与房地产价格数据,在利用ADF法对各个时间序列数据进行检验的基础上,运用Granger因果关系检验模型对大连市房地产开发资金来源变动与房价变动之间的因果关系进行分析,并运用灰色关联度方法对与房价有显著Granger因果关系的资金来源之间的关联度进行实证研究。研究结果显示:利用外资与房价的变化并没有直接的因果关系,大连市房地产是以其他资金来源为主,国内贷款和自筹资金对总的资金开发来源的影响处于同一水平。     

Transport infrastructure equities in mixed-asset portfolios: estimating risk with a Garch-Copula CVaR model

Transport infrastructure is an important subsector within infrastructure, but knowledge of its equities in terms of risk-return characteristics and contribution to portfolio performance is still limited. This study assesses the subsector individually and in a multi-asset, index-based portfolio. In doing so, we apply a t-Copula-based Conditional Value-at-Risk model to simulate risk and returns. Our findings reveal that the subsector has a relatively low dependency on other equities, performs like other alternative asset classes such as general real estate, and does not grant significant risk diversification benefits for mainstream institutional investors such as pension funds. Investors aiming for higher target returns may however assign substantial weights to transport infrastructure, supporting our conjecture that it does not share the same asset class characteristics as general infrastructure. By contrasting Value-at-Risk (VaR) and Conditional Value-at-Risk (CVaR) scores for both the mean-variance framework and the t-Copula simulation, we further document the limitations of traditional VaR approaches. Hence, this study’s results support the use of risk assessment tools that incorporate non-normal distributions to represent multivariate dependence structures.     

Understanding the contribution of curb appeal to retail real estate values

The concept of curb appeal and its impact on property values has been largely neglected in the real estate literature. In the context of retail real estate, curb appeal represents the general attractiveness of a store as viewed from the sidewalk or parking lot that is expected to affect consumer patronage decisions and consequently property values. We first develop a measurement instrument for curb appeal and assess its validity using exploratory and confirmatory factor analysis. Our results suggest that curb appeal is multidimensional and consists of an atmospheric, architectural and authenticity dimension. Then, we use survey responses, transaction data and spatial regression to quantify the impact of curb appeal on sales prices. We find that the atmospheric and architectural dimensions have a significantly positive impact on sales prices. We also show that curb appeal dimensions are highly correlated with observable building features traditionally included in hedonic pricing models.     

基于实物期权理论的跨流域调水工程风险管理探讨

在介绍了实物期权理论产生和发展的基础上,论证跨流域调水工程中应用实物期权理论进行风险管理的必要性和可行性;其次研究如何利用实物期权理论构建水权期权和基于Black-Scholes模型进行水权期权定价;最后,分析和展望在跨流域调水工程风险管理中运用实物期权理论时应该注意的问题。     

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.     

Time to completion in the Lagos commercial real estate market: an examination of institutional effects

This study explores how institutions affect the process of investment and the time it takes to buy and sell commercial property in Lagos, Nigeria. We isolate institutional factors that impact transaction efficiency and provide a snapshot of the process with average transaction times for the largest commercial real estate market in the most populous country in Africa. This study adopts a qualitative approach and relies on information collected from semi-structured interviews with 36 senior level individuals active in the Lagos commercial real estate market. Among our findings, we note the commercial real estate transaction process is divided into seven distinct stages and the average time to complete an acquisition across all stages (all property types) is 306 days. Title registration/perfection stage takes the longest time (around 132 days) and represents a significant risk to investors. We argue this is a consequence of imperfections in the formal institutions of title registration.     

Impact of quality-led design on real estate value: a spatiotemporal analysis of city centre apartments

This paper estimates the impact of quality design attributes on real estate value through empirical investigation of the owner-occupied multifamily residential sector. The methodological design is based on spatiotemporal modelling using a unique data-set of 424 Belfast City Centre apartments sold during the period 2000–2008. The key findings indicate that urban scale aspects of quality such as connectivity and vitality associated with building density add to real estate value. At the building level, quality features highly valued by home buyers are namely appropriateness of material quality, fenestration and massing to the surroundings. These key criteria are considered to have a significant visual perception compared to more complex concepts such as identity, material choice and overall condition. The contribution to knowledge involves extending the hedonic model to incorporate a wider selection of design quality variables; and improving estimation through the use of spatiotemporal modelling.     

Determinants of transaction activity in commercial real estate markets: evidence from European and Asia-Pacific countries

Variations in transaction activity between commercial real estate markets could have important implications for investment strategies and pricing. We consider why turnover rates, a common liquidity proxy, vary between countries and over time. We examine 38 countries in Europe and Asia-Pacific over the period 2000–2014. A conceptual framework is discussed prior to estimation of panel models that use turnover rates as the dependent variable. Our results indicate that the size and wealth of a country, the risk associated with that country and the performance of its commercial real estate market are significant factors that explain transaction activity. The quality of property rights is also an important factor.     

Translocality on the real estate market: A new extended approach

Growing levels of socio-economic development around the world have induced globalisation processes that generally diminish the role of local communities and local processes. However, the intensification of global processes has led to an unexpected turn towards locality. This process is referred to as glocalisation. Globalisation leads to the generalisation of locality (universalisation), and glocalisation processes localise globality (indigenisation). Globalisation and glocalisation are integrated through translocality which supports evaluations of the co-existence of both processes. This study proposes a general concept of translocality (TR) and a methodology for measuring translocality (MTR). In this approach, translocality reflects the degree of tension/adaptation between globalisation and glocalisation. The results of the study indicate that translocal processes on regional markets in Poland proceed gradually, and that they are accompanied by the emergence of convergence clubs of translocal regions and the progressing inter-regional stratification in translocality levels.     

Hybridization of valuation procedures as a medicine supporting the real estate market and sustainable land use development during the covid-19 pandemic and afterwards

Currently we are facing the pandemic situation that occur all over the world. Regardless the country or even the region, the negative consequences that are expected could be very big and the level of crisis is not predictable. This situation is the challenge for the real estate market as well. Due to this fact, the authors believe that there is the time when deep transformation of approaches, procedures and awareness related to valuation domain becomes. Today, due to the fact of the global COVID-19 and pandemic restrictions is the best time to implement the automated models and advanced technological solutions to the valuation world.The authors proposed the hybrid approach that is the way to reconcile the participants on the property market. Hybrid approach is understanding as the synergy in combining aspects of new (automated solutions) and traditional components that are developed in the agile mode system creation. The proposed solutions can be treated as a cure for some symptoms of the real estate market infection but also as a vaccine, which should to a large extent prevent restrictions and nuisance in real estate valuation in case of repeated infection.     

Co-movement between the US and the securitised real estate markets of the Asian-Pacific economies

The novelty of this study is the use of continuous wavelet transform analysis of wavelet coherence, as well as its partial and multiple forms, to revisit the co-movements of Asian-Pacific public real estate markets among themselves and with the US, for a time span which covers the 12 January 1995–23 June 2016 period. Earlier research does not have satisfactory results because traditional methods average different relationships in time domain only. From the wavelet analysis, investors can extract the time-scale that most interests them. We find that the co-movement relationship across the real estate markets increases during the two major crisis period, as well as becomes stronger as the scale increases. Hong Kong and Singapore have the strongest time-scale co-movement relationship. Finally, the influence of domestic macroeconomic factors on real estate return co-movement appears to be greater at the long-term horizons than at the short-term horizons.     

A machine learning approach to big data regression analysis of real estate prices for inferential and predictive purposes

The hedonic price regressions have mainly been used for inference. In contrast, machine learning employed on big data has a great potential for prediction. To contribute to the integration of these two strategies, this article proposes a machine learning approach to the regression analysis of big data, viz. real estate prices, for both inferential and predictive purposes. The methodology incorporates a new procedure of selecting variables, called ‘incremental sample with resampling’ (MINREM). The methodology is tested on two cases. The first is data from web advertisements selling used homes in Colombia (61,826 observations). The second considers the data (58,888 observations) from a sample of the Metropolitan American Housing Survey 2011 obtained and prepared by a reference study. The methodology consists of two stages. The first chooses the important variables under MINREM; the second focuses on the traditional training and validation procedure for machine learning, adding three activities. In both test cases, the methodology shows its value for obtaining highly parsimonious and stable models for different sample sizes, as well as taking advantage of the inferential and predictive use of the obtained regression functions. This paper contributes to an original methodology for big data regression analysis.     

The 4% rule: Does real estate make a difference?

This paper examines the wealth maximisation and preservation effects of including commercial real estate in retirement-phase portfolio management. Prior research addresses the role of real estate during the wealth-accumulation phase of the investor lifecycle; however, little is known about the contribution of real estate during the invest-and-spend, or decumulation, phase. To address this issue, we estimate short-fall risk based on the widely known 4% Rule. We use pricing data for multiple asset classes and simulation techniques, combined with a robust correlation structure, to examine: short-fall risk sensitivity to alternative spending rules; the impact of public vs. private real estate allocations; wealth preservation as an investment objective; and the effect of real estate on upside, or wealth maximisation, potential. We find short-fall risk in a decumulation portfolio decreases with substantial allocations to real estate. This result holds for a portfolio including either public or private real estate. Additionally, and under most conditions, the best performing decumulation-phase portfolios include a real estate allocation with both public and private real estate exposure. These results have significant implications for investors, whether they be retirees, plan administrators or endowments, as well as financial economists studying the lifecycle of investment decisions.