A Survey of Institutional Investors' Attitudes and Perceptions of Residential Property: The Swiss, Dutch and Swedish Cases

Abstract

This paper provides evidence about institutional investors' altitudes and perceptions of residential property as an investment assei group in three European countries (Switzer/and, the Nether/ands and Sweden). These countries stand out, with an extraordinari/y large institutional residentia/ ownership, in fac/, residentia/ institutiona/ a//ocation represents about 6%, 2% and 3% of the total institutional investment in the Switzerland, the Nether/ands and Sweden respective/y. Housing is the most important institutional property assei type in Switzerland and the Netherlands, comprising over 52% and 50% of their institutional property portfolios respective/y. ln Sweden residential property plays an important, but not dominant role in the domestic institutional property portfo!ios, representing about 21 % of the institutional property holdings. Using a postal survey of representatives of pension funds, insurance companies, property investment and assei management companies the study analyses the attractiveness of residential property in terms of institutional investment goals. The survey examines the institutional investors' perceptions of housing investment, namely with respect to its returns, vo/ati/ity, iriflation hedging, liabi/ities matching and correlation with shares, bonds and non-residenfial property. Additiona//y, the survey /ooks at the institutional investors' experiences regarding the priva/e rented sector.

The Positioning of Sustainability within Residential Property Marketing

“…In general, they rated investment drivers lower and impediments higher than, for example, developers or real estate investment trusts (REITs) and they seem to be particularly worried that such investments could conflict with their fiduciary duties. This confirms the view of Guy et al (2002), who found that institutional investors tend not to seek innovation (see Montezuma, 2006).…”

Residential Property as an Institutional Asset: The Swiss and Dutch Cases

“…Goetzmann and Ibbotson, 1990;Eichholtz and Koedij, 1996) report that residential property tends to exhibit relatively low correlations with other property types, which suggests that residential property offers risk diversification benefits even when held in a multi-asset portfolio that already includes direct non-residential property. Similarly, the empirical survey on institutional investors in Switzerland and the Netherlands (Montezuma, 2006) reports that residential property is perceived as being able to provide diversification benefits even when institutional portfolios already include non-residential property. The same survey reports that Swiss and Dutch institutional investors are looking mainly for capital appreciation returns in residential property, whereas in non-residential property they are looking for income return.…”

“…This value is lower than those we could expect from our bootstrap results at the middle of the efficient spectrum. The concentration of residential institutional investment in a relatively small number of organizations (Montezuma, 2006) could explain the apparent discrepancy between the empirical and bootstrap allocations. Those institutions are actually able to have allocations to housing equity large enough to provide significant diversification benefits.…”

“…In spite of the fact that the two countries have a sufficient potential institutional private rented market to satisfy the earlier criteria, only Switzerland presents empirical allocations to residential property above 5%. The institutional investment in residential property tends to be concentrated in a small number of organizations as suggested by Montezuma (2006). For example, the author The paper now moves to the second of the key criteria: that residential property in these countries constitutes an acceptable portfolio diversifier.…”

“…Alternatively, the residential investor could accept lower rent levels when he/she is able to take advantage of capital appreciation, buying housing stock in downswing and selling in upswing. According to Montezuma (2006) surveys the majority of Dutch and Swiss institutional investors that are able to take advantage of the housing cycle.…”