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

Turning off the gas tap: Sustainable Energy Policies, Practices and Prospects in the Netherlands

This chapter describes efforts to transition to more sustainable ways of living in the Netherlands. Backhaus captures the status quo of Dutch sustainable energy policies and projects in clarity and brevity, suggesting that prospects to live up to the commitment made in the Paris Agreement are dim. The Perspective project, a major, yet not well-known Dutch research programme in the 1990s discussed as best-practice example, suggests that substantial change is possible. Like most past and current sustainability efforts, the Perspective project focused on individual behaviour change. It qualifies as best-practice example by demonstrating that living well, healthy and sustainably can go hand-in-hand. Marking the Dutch cycling culture as an example, Backhaus proposes that, rather than targeting individuals, future sustainable energy policies and programmes should best address infrastructures, social norms and collectives

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

Assessing the accessibility of the homeownership market

Abstract: In this paper, we examine the accessibility of the homeownership market using measures that include both supply and demand characteristics of regional housing markets. We apply these measures empirically on an extensive data set that covers the Dutch housing market. Our analysis quantifies the extent to which the position of new entrants of the homeownership market, the first-time buyers, has weakened over the sample period and we identify which factors are driving this change. We find that due to financial constraints of young households smaller portions of the housing market are becoming affordable. However, more importantly, we report that first-time buyers today need to contend with a much larger group of competing bidders on every house that suits their financial situation, than ever before

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

Lucky bets and hot hands - Is your fund manager really performing?

Congratulations! You are a lucky winner! All too often we receive email messages like these in our inbox and they invariably turn out to be nothing but a scam. But why be lucky? For the manager, the financial equivalent of winning is in outperforming benchmarks or the markets, preferably through the application of skill, insight and experience, not pure luck

Capital Structure Policies in Europe: Survey Evidence

In this paper we present the results of an international survey among 313 CFOs on capital structure choice. We document several interesting insights on how theoretical concepts are being applied by professionals in the U.K., the Netherlands, Germany, and France and we directly compare our results with previous findings from the U.S. Our results emphasize the presence of pecking-order behavior. At the same time this behavior is not driven by asymmetric information considerations. The static trade-off theory is confirmed by the importance of a target debt ratio in general, but also specifically by tax effects and bankruptcy costs. Overall, we find remarkably low disparities across countries, despite the presence of significant institutional differences. We find that private firms differ in many respects from publicly listed firms, e.g. listed firms use their stock price for the timing of new issues. Finally, we do not find substantial evidence that agency problems are important in capital structure choice

Corporate Finance In Europe Confronting Theory With Practice

In this paper we present the results of an international survey among 313 CFOs on capital budgeting, cost of capital, capital structure, and corporate governance. We extend previous results of Graham and Harvey (2001) by broadening their sample internationally, by including corporate governance, and by applying multivariate regression analysis. We document interesting insights on how theoretical concepts are applied by professionals in the U.K., the Netherlands, Germany, and France and compare these results with the U.S. We discover compelling variations between large and small firms across all markets. While large firms frequently use present value techniques and the capital asset pricing model when assessing the financial feasibility of an investment opportunity, CFOs of small firms still rely on the payback criterion. Regarding debt policy we document more subtle disparities across firms and national samples. We also find substantial variation in corporate governance structures, which turn out to be more oriented at shareholder wealth in the Anglo-Saxon countries. Corporate finance practice appears to be influenced mostly by firm size, to a lesser extent by shareholder orientation, while national differences are weak at best