International Evidence on Real Estate as a Portfolio Diversifier

Hoesli, Martin; Lekander, Jon; Witkiewicz, Witold

doi:10.1080/10835547.2004.12091136

Cited by 123 publications

(60 citation statements)

References 31 publications

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“…The real estate sector had successfully attracted significant interest from international investors due to its increasing level of liquidity, superior returns and improved opportunities for diversification (D’Arcy, 2009; Topintzi et al , 2008). Other empirical studies suggested that international real estate investment could be regarded as a hedge against excessive risks associated with equity investments (Hoesli et al , 2004; Moshirian, 1999; Sirmans and Worzala, 2003; Wilson, 2003). Past Australian foreign investment studies revealed that the Australian residential property market was financialised and emerged as a global investable asset class.…”

Section: Key Determinants Of Downturn 2018mentioning

confidence: 99%

Residential property market determinants: evidence from the 2018 Australian market downturn

Wong

Mintah

2019

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Purpose The purpose of this paper is to validate and uncover the key determinants revolving around the Australian residential market downturn towards the 2020s. Design/methodology/approach Applying well-established time series econometric methods over a decade of data set provided by Australian Bureau of Statistics, Reserve Bank of Australia and Real Capital Analytics, the significant and emerging drivers impacting the Australian residential property market performance are explored. Findings Besides changes in the significant levels of some key traditional market drivers, housing market capital liquidity and cross-border investment fund were found to significantly impact the Australian residential property market between 2017 and 2019. The presence of some major positive economic conditions such as low interest rate, sustainable employment and population growth was perceived inadequate to uplift the Australian residential property market. The Australian housing market has performed negatively during this period mainly due to diminishing capital liquidity, excess housing supplies and retreating foreign investors. Practical implications A better understanding of the leading and emerging determinants of the residential property market will assist the policy makers to make sound decisions and effective policy changes based on the latest development in the Australian housing market. The results also provide a meaningful path for future property investments and investigations that explore country-specific effects through a comparative analysis. Originality/value The housing market determinants examined in this study revolve around the wider economic conditions in Australia that are not new. However, the coalesce analysis on the statistical results and the current housing market trends revealed some distinguishing characteristics and developments towards the 2020s Australian residential property market downturn.

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Section: Key Determinants Of Downturn 2018mentioning

confidence: 99%

Residential property market determinants: evidence from the 2018 Australian market downturn

Wong

Mintah

2019

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“…Indeed, the determination of the optimal allocation on real estate asset does not rise to a clear consensus, even almost all investors agree that real estate can be an effective portfolio diversifier (see e.g. Hoesli et al, 2004). Hoesli and MacGregor (2000) suggest that allocation on real estate would be equal to about 15-20%.…”

Section: Introductionmentioning

confidence: 99%

Mixed-asset portfolio allocation under mean-reverting asset returns

et al. 2018

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Standard results about portfolio optimization suggest that the allocation to real estate in a mixed-asset portfolio should be around 15 − 20%. However, the institutional investors share in real estate is significantly smaller, around 7 − 9%. Many researches have addressed this point even if as of today no consensus has emerged. In this paper, we built-up an allocation model that can explain the empirical observed weights. For this purpose, we account for the term structure of all standard financial assets and also of real estate asset class (expected returns, volatilities and correlations depending on the time to maturity). We propose a dynamic portfolio optimization model that allows analyzing portfolio weights with respect to the whole term structure modelling, due to its tractability and its good fit when being adequately calibrated. In this framework, we provide explicit and operational solutions to the dynamic mixed-asset portfolio allocation (cash, real estate, stock and bond). The results show that accounting for investment horizon and mean-reverting dynamics allows to better examine how portfolio allocations depend on both risk aversion and investment horizon.

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“…Research on international real estate acquisition dates back to the 1980s, but it has mainly focused on why investors choose to own foreign real estate, and primarily on benefits of diversifying property assets internationally in the mean-variance framework. Among the literature, one strand of research analyses investment decisions on real estate-only portfolios (Case et al, 2000; Eichholtz et al, 1995) and another concerns mixed-asset portfolios combining both real estate and financial assets (Cheng et al, 1999; Hoesli et al, 2004; Newell and Webb, 1996). The review by Sirmans and Worzala (2003) highlights the diversification benefits of inclusion of international real estate, and efficient portfolios with international real estate outperforming those without, hence indicating that international diversification appears to be important.…”

Section: Introductionmentioning

confidence: 99%

Foreign liquidity to real estate market: Ripple effect and housing price dynamics

et al. 2014

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Globalisation enables foreign liquidity to access local property markets. This paper depicts a strong connection between foreigners’ property acquisitions and regional housing price movements in Singapore. Testing structure breaks also illustrates a ripple effect of prices from the central city to suburbs. A structural vector autoregression incorporates these two observations. Impulse-response function and forecast-error variance decomposition show that central region’s foreign-liquidity shocks can greatly impact housing price growth in not only the central region but also the non-central region where foreign buyers are inactive. The ripple effect of prices plays an important role. Non-central region’s foreign-liquidity shocks, in contrast, have small effects on both regions. Impacts of foreign-liquidity shocks can reach the public-housing market, where foreigners’ participation is prohibited. The findings are useful to policy makers who consider regulations of foreign home buyers as an instrument to stabilise housing markets.

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International Evidence on Real Estate as a Portfolio Diversifier

Cited by 123 publications

References 31 publications

Residential property market determinants: evidence from the 2018 Australian market downturn

Residential property market determinants: evidence from the 2018 Australian market downturn

Mixed-asset portfolio allocation under mean-reverting asset returns

Foreign liquidity to real estate market: Ripple effect and housing price dynamics

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