Japanese Purchases, Exchange Rates and Speculation in Residential Real Estate Markets

Miller, Norman G.; Sklarz, Michael; Real, Nicholas

doi:10.1080/10835547.1988.12090567

Cited by 41 publications

(11 citation statements)

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“…While the UK, The Netherlands and Germany have long-established traditions in international property investment [19,24], the extent of international property investment by Japan in recent years has attracted considerable attention [17,18,21,25]. In contrast, the level of US participation in international property investment has been minor [24], largely reflecting availability of local investment opportunities.…”

Section: Status Of International Property Investmentmentioning

confidence: 99%

“…In the area of international property investment, most studies have concentrated on either: q analysis of property investment patterns by specific groups in particular countries, such as Japanese property investment in the USA [21,22]; or q historic performance analysis of including international property in a mixed-asset investment portfolio, with respect to risk reduction and portfolio diversification benefits [2,13,[16][17][18]20,23]. To focus on institutional investor attitudes and perceptions to overseas property investment and the subsequent financial implications of these decisions, Worzala [19] examined the international property investment decision making by institutional investors in the UK and The Netherlands (and to a lesser extent in Germany and Sweden), with institutional investors in both of these countries having "traditionally" held overseas property in their investment portfolios.…”

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confidence: 99%

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The role of international property in investment portfolios

Newell

Worzala

1995

Journal of Property Finance

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IntroductionThe growth, integration and deregulation of world financial markets, as well as changes in international politics and economic policies have resulted in increased global investment opportunities. For example, in 1991, of the $7 trillion (or £3.5 trillion) in worldwide pension fund assets, 7 per cent was invested abroad. For US and UK pension funds, 4 per cent and 25 per cent respectively were invested abroad [1,2]. These levels of foreign investment by pension funds are expected to increase considerably in future years. For example, the level of foreign investment by US pension funds is projected to be 13 per cent by 1996, with the level in Canadian pension funds expected to increase from 11 to 17 per cent between 1991-1994[3]. These increased global investment opportunities have also generated a range of key financial challenges; particularly concerning currency risk exposure.For stocks and bonds, there is considerable historic evidence for over 30 years that investing internationally offers diversification benefits with respect to reduced portfolio risk and enhanced portfolio performance [1,[4][5][6][7][8]. Even though international property accounts for 37 per cent of the total world investable wealth [9], the potential role and benefits of international property in a mixedasset portfolio has received little attention in recent years. This is due primarily to the limited, valuation-based performance indices which are available for international property. Similarly, while a large amount of information is available concerning the general financial decision-making process and criteria for property investment[10-12], limited information is available concerning international property investment and financial strategies, and property finance decision-making processes.Studies concerning the role of international property equities in a mixedasset portfolio [13][14][15] have demonstrated the significant diversification benefits vis-á-vis US real estate investment trusts (REITs) and world securities, although higher volatility was also evident for these international property equities. For direct property investment in the USA, it has been shown that investing in US property by Japanese and UK investors did not improve foreign investor portfolio performance [16][17][18]. This resulted from any portfolio diversification

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Section: Status Of International Property Investmentmentioning

confidence: 99%

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confidence: 99%

The role of international property in investment portfolios

Newell

Worzala

1995

Journal of Property Finance

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“…Similarly, Miller et al (1988) determine that Japanese buyers paid significantly more than other buyers in two Honolulu areas in the late 1980s. Because real estate prices in Japan were substantially higher than in Honolulu, this result can be interpreted as evidence of either higher search costs or anchoring effects.…”

Section: Introductionmentioning

confidence: 97%

Asymmetric buyer information influence on price in a homogeneous housing market

2014

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Buyers often pay different prices for almost identical houses. One possible explanation is that there are information asymmetries in housing markets. Perhaps, buyers from outside the area have higher search costs and know less about the local market relative to that of current residents. In addition, an out-of-town buyer's price expectations could be anchored to market prices in their town of origin. This study examines the effect of buyer heterogeneity in the form of geographic location on house prices. We use a new data set to examine the non-local buyer information asymmetry and anchoring hypothesis. Using transaction data from a large development in Chengdu, China, our empirical models are estimated with relatively homogeneous units sold over a short period of time by one seller to minimise possible bias resulting from omitted variables. Our results support the hypotheses that non-local buyers pay higher prices and that high price anchoring occurs.

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“…Information sets may differ due to disparate familiarity with the marketplace, say out-of-town/country v. in-town/country buyers (that is, foreigners v. locals). Miller et al (1988), for instance, fi nd that Japanese buyers signifi cantly overpaid for real estate in two Honolulu neighbourhoods in the late 1980s. A more recent study by Lambson et al (2004) fi nds that in the US, out-of-state buyers pay a higher price compared with local buyers.…”

Section: The Price Premium Information Asymmetrymentioning

confidence: 99%

“…First, we enhance the understanding of the information asymmetry explanation for house price premiums. Past studies usually use different groups of buyers who purportedly have different search costs and require a different number of searches before purchase to test for information asymmetries (Miller et al, 1988;Myer et al, 1992;Turnbull and Sirmans, 1993;Watkins, 1998;Lambson et al, 2004). However, there are no consistent results.…”

Section: Introductionmentioning

confidence: 99%

Buyer Exuberance and Price Premium

Neo

Ong

2008

Urban Studies

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It has been demonstrated that the real estate market disciplines irrational price premiums. However, the persistence of price premiums begs the question of what causes price premiums in the first place. This paper seeks to examine two explanations for price premiums—the conventional information asymmetry explanation and the buyer exuberance explanation as motivated by behavioural studies. The results show that information asymmetry explains price premiums, and this finding is robust across two sub-hypotheses tested—namely, information differences arising from market familiarity and product characteristics. In addition, we find that price premiums are also caused by buyer exuberance, specifically, exuberance arising from representativeness, purchasing power and anchoring effects.

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Japanese Purchases, Exchange Rates and Speculation in Residential Real Estate Markets

Cited by 41 publications

References 1 publication

The role of international property in investment portfolios

The role of international property in investment portfolios

Asymmetric buyer information influence on price in a homogeneous housing market

Buyer Exuberance and Price Premium

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