The Changing Face of Real Estate InvestmentManagement

Clayton, Jim; Fabozzi, Frank J.; Giliberto, S. Michael; Gordon, Jacques N.; Hudson‐Wilson, Susan; Hughes, William C.; Liang, Youguo; MacKinnon, Greg; Mansour, Asieh

doi:10.3905/jpm.2011.37.5.012

Cited by 4 publications

(1 citation statement)

References 26 publications

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“…Simultaneously, the severe implications for institutional investors caused by the housing price bubble in the USA and Europe, in particular in Spain and Ireland, during the Sovereign Debt Crisis, helped to increase the supply of academic housing market forecast literature in the past years (Rapach and Strauss, 2009; Kulkarni et al , 2009; Gu et al , 2011; Park and Bae, 2015). According to Clayton et al (2011), a fundamental understanding of risks, their causes and their management even has become the basic decision-making requirement in the real estate investment process.…”

Section: Forward-looking Financial Risk Managementmentioning

confidence: 99%

Forward-looking financial risk management and the housing market in the United Kingdom: is there a role for sentiment indicators?

Kunze¹,

Basse²,

Gonzalez

et al. 2020

JRF

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Purpose In the current low-interest market environment, more and more asset managers have started to consider to invest in property markets. To implement adequate and forward-looking risk management procedures, this market should be analyzed in more detail. Therefore, this study aims to examine the housing market data from the UK. More specifically, sentiment data and house prices are examined, using techniques of time-series econometrics suggested by Toda and Yamamoto (1995). The monthly data used in this study is the RICS Housing Market Survey and the Nationwide House Price Index – covering the period from January 2000 to December 2018. Furthermore, the authors also analyze the stability of the implemented Granger causality tests. In sum, the authors found clear empirical evidence for unidirectional Granger causality from sentiment indicator to the house prices index. Consequently, the sentiment indicator can help to forecast property prices in the UK. Design/methodology/approach By investigating sentiment data for house prices using techniques of time-series econometrics (more specifically the procedure suggested by Toda and Yamamoto, 1995), the research question whether sentiment indicators can be helpful to predict property prices in the UK is analyzed empirically. Findings The empirical results show that the RICS Housing Market Survey can help to predict the house prices in the UK. Practical implications Given these findings, the information provided by property market sentiment indicators certainly should be used in a forward-looking early warning system for house prices in the UK. Originality/value To authors’ knowledge, this is the first paper that uses the procedure suggested by Toda and Yamaoto to search for suitable early warning indicators for investors in UK real estate assets.

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