The Boom and Gloom of Real Estate Markets

Real estate markets around the world have earned a complicated reputation. On the one hand, real estate markets offer investors a wide spectrum of profitable investments opportunities, investments that nowadays can be executed by simply buying shares of stock listed by real estate investment companies. In the first half of this inaugural address, the boom of these real estate stocks is discussed. In less than three decades, the listed real estate market developed into a sector with almost 400 listed firms worldwide, representing a sum aggregate market capitalization of around one trillion dollars by the end of 2007. Three relevant lessons regarding these international real estate stocks are discussed in the first fifteen pages of this booklet, lessons offered by real estate research from the Rotterdam School of Management. On the other hand, real estate markets are notorious for attracting entrepreneurs with bad intentions, seeking for opportunities to circumvent the strong arm of the law. These activities have yielded many headlines in the daily press and have given real estate a gloomy reputation. The dynamics of foreclosure auction of homes is an example of a source of negative headlines, stressing that the suboptimal organization of these auctions prohibits distressed sellers from earning a fair price for their home. In the second part of this address, I focus on an empirical test of the matter. By analyzing over 700 auctioned homes the dynamics of the auction system is discussed objectively. This offers a fair view on the problems at hand and searches for way to improve the system in the near future

Local Office Rent Dynamics: a tale of ten cities

This study applies rent adjustment models for ten major European office markets. We capture long-run equilibrium relationships of demand and supply variables and their short-term corrections in a two equation error correction model. We test whether the local nature of office markets makes a model based on national economics inaccurate if local and national markets do not move in tandem. For this we employ a unique dataset, which includes both disaggregated and national variables to model changes in real prime rents for a group of premier and second tier office market cities across Europe for the period 1990–2006. We explicitly compare results that are derived from models that include different levels of geographic aggregation. Results of the two stage error correction model indicate that international office rents adjust to short-run changes in office related economic activity, lagged rent changes, and to the deviation of rents from their long-run values. At the same time our results offer no proof that error correction mechanism models for office rents improve significantly by specifying economic growth figures beyond the national aggregated level for the cities included in our analysis

De Woningmarkt bestaat niet

Door de stagnerende prijsontwikkelingen op de woningmarkt is de discussie over de prijsontwikkeling opgelaaid. De woningmarkt wordt in deze discussie onterecht als één geheel beschouwd

Real Estate in an ALM Framework - The Case of Fair Value Accounting

This study examines the liability hedging characteristic of both direct and indirect real estate, in the advent of fair value accounting obligations for pension funds. We explicitly model pension obligations as being subject to interest and inflation risk to analyze the ability of real estate investments in hedging the market value of pension liabilities and to quantify its role in an ALM portfolio. Based on a sample period of 1984-2006, direct and indirect real estate merit inclusion in an ALM portfolio because of their attractive risk-reward properties and its diversification potential, rather than its liability hedging abilities