An evaluation of the use of combination techniques in improving forecasting accuracy for commercial property cycles in the UK

In light of the financial and property crisis of 2007-2013 it is difficult to ignore the existence of cycles in the general business sector, as well as in building and property. Moreover, this issue has grown to have significant importance in the UK, as the UK property market has been characterized by boom and bust cycles with a negative impact on the overall UK economy. Hence, an understanding of property cycles can be a determinant of success for anyone working in the property industry.This thesis reviews chronological research on the subject, which stretches over a century, characterises the major publications and commentary on the subject, and discusses their major implications. Subsequently, this thesis investigates property forecasting accuracy and its improvement. As the research suggests, commercial property market modelling and forecasting has been the subject of a number of studies. As a result, it led to the development of various forecasting models ranging from simple Single Exponential Smoothing specifications to more complex Econometric with stationary data techniques. However, as the findings suggest, despite these advancements in commercial property cycle modelling and forecasting, there still remains a degree of inaccuracy between model outputs and actual property market performance. The research therefore presents the principle of Combination Forecasting as a technique helping to achieve greater predictive outcomes. The research subsequently assesses whether combination forecasts from different forecasting techniques are better than single model outputs. It examines which of them - combination or single forecast - fits the UK commercial property market better, and which of these options forecasts best. As the results of the study suggest, Combination Forecasting, and Regression (OLS) based Combination Forecasting in particular, is useful for improving forecasting accuracy of commercial property cycles in the UK

Two Centuries of Farmland Prices in England

The dissemination of robust real estate data can help to improve market efficiency and investment analysis. To provide a perspective on property prices, a long series is vital. While long commercial and residential real estate data series are available, agricultural land is less well served. Comparable series describing long-term price and return histories for farmland in England are fragmented. We redress this data deficiency after considering the methodological complexities involved. The study employs a chain-linking approach to construct a long-term farmland price series for England. It then adjusts the series for inflation to examine real land prices. The resulting two-century series of English farmland prices establishes a basis for a more efficient farmland market analysis. Notwithstanding issues around long-run chain component heterogeneity, the combined series illuminates English average farmland price dynamics and changing land market fortunes. For more than two centuries English land price real capital returns were positive. Farmland real price growth was 0.33 per cent annually from 1781 to 2013 and 0.71 per cent from 1801 to 2013 as measured by the geometric mean. The series provides prima facie support for land investment, even when ignoring spatial peri-urban opportunities, rental income or tax advantages

Century of research on property cycles: a literature review

The existence of cycles in building and property, has grown to have significant importance in the UK and internationally; whereas property markets have been characterised by boom and bust cycles with a negative impact on the national economies. As a result, property cycles became a popular research topic amongst property professionals and scholars, with a greater understanding of the cyclical behaviour of the property market being seen as a major guide to the financial success (failure) of property investments. consequently, considerable literature has accumulated over the years on the subject. This paper provides a review of this literature, mostly written in the UK and US, with international insights on the subject. This paper reviews research on the subject chronologically over a one hundred-year period. The study is designed to provide readers with a historical overview of Property cycles research by emphasising the underlying theme which dominated a particular period of this research, as well as indicating methods, data analysis techniques employed and outcomes of these studies. Its ai is to put more clarity on the subject, as well as help to navigate anyone interested in Property cycles through a considerable amount of research which has accumulated over the last century

Skyscraper indicator and its application in the UK

Objective: The research examines Skyscraper Indicator and its application in the UK. Until more recently, it was thought that this indicator was not suitable in gaging trajectory of Britain’s economy. The current study is therefore set to investigate whether Skyscraper Indicator can be used as a potential leading indicator for the UK. Research Design & Methods: Research employs dummy variable regression to test the hypothesis. The study selects quarterly UK GDP and GDP per capita series over Q1 1960 - Q4 2014 period as macro variables and a series of dummies for construction starts, durations and completions of the record-breaking buildings in the UK. Findings: Despite some of the methodological limitations, estimates suggest that the announcement of the construction of tallest building in the UK is related to national GDP. Implications & Recommendations: To make robust economic forecasts, analysts may therefore use the announcement of the construction of the record breaking skyscraper as a possible bell-weather in gaging future direction of the UK economy. They may turn their gaze towards the London skyline when contemplating UK market movements. Contribution & Value Added: The paper adds additional evidence on the contested Skyscraper Indicator issue

The use of combination forecasting approach and its application to regional market analysis

"Econometric modelling of the property market has been exercised for several decades. Despite advancements in the field, there is still an element of uncertainty in property market modelling and forecasting. This uncertainty arises due to prevailing modelling practices. On one hand, researchers select the best performing model and disregard alternatives. On the other hand, researchers face a dilemma in deciding which model to choose when competing specifications produce different results. A possible solution is to use the principle of combination forecasting to reduce uncertainty and improve accuracy. Certainly, combination forecasting has its limitations. One criticism is that combination forecasting has predominantly focused on national property markets analysis. To enhance the application of combination forecasting, it would be useful to use it in research on regional markets analysis." (author's abstract

Day of the week effect and Baltic stock exchanges

Objective: There is an ongoing debate in the field of finance and economics on the existence of abnormal equity returns associated with calendar events. Commentaries including tax-loss selling at year-end, cash flows at month-end and negative news flow over the weekend give convincing evidence in support of returns abnormalities. In the mainstream markets (sector and geography wise) the topic of calendar anomalies was heatedly debated by industry participants and academics. Baltic bourses, however, received less attention. Given the gap, this current research was set to examine daily variations in the performance of the NASDAQ Baltic series. Research Design & Methods: A well-established parametric algorithm was employed to test whether variations in returns are statistically different throughout week. Dummy-variable regression with an additional set of dummies that controlled for outliers in the series was performed. Findings: The study found no evidence in support of the day-of-the-week in four NASDAQ Baltic series. However, Thursday and Friday came out as being positive and significant in Vilnius and Riga series. Contribution & Value Added: The paper adds additional evidence on the contested issue of calendar anomalies. Certainly, differentials achieved on Thursday or Friday would not generate abnormal returns for institutional or individual investor. However, investors could use this updated knowledge to trade more effectively

Is there a Housing Bubble in Turkey?

There was a notable housing price inflation in aggregate/local levels in Turkey during the last few years. Although the country’s economic fundamentals remain strong, the probability of a housing bubble is a heated debate among market participants. This timely investigation brings greater clarity to whether the Turkish housing market is in a bubble. The study uses a multi-strand approach to dissect the bubble over the period of Jan. 2010 - Dec. 2014. First, monthly/annual price-to-income and monthly price-to-rent ratios are examined for the national Turkish as well as regional Istanbul, Izmir and Ankara housing markets. Second, an extended CASE and SHILLER (2003) model is applied assessing the interdependence between housing prices and a series of explanatory variables. Lastly, the Right Tail Augmented Dickey-Fuller (Rtadf) test is performed to support the overall analysis. This study finds that neither affordability ratios nor regression estimates support the existence of the bubble in Turkey