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

Montezuma, Joaquim; Gibb, Kenneth

doi:10.1080/09599910601095324

Cited by 7 publications

(7 citation statements)

References 22 publications

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“…The same study shows that insurance companies hold 21 per cent of their wealth in real estate. The interest of institutional investors in real estate is focused mainly on the inflation-hedging characteristics of this asset class (Hamelink and Hoesli, 1996;Liu et al, 1997) and also on its stable cash flows, apart from the usual diversification benefits (Montezuma and Gibb, 2006).…”

Section: "Duration" Of Swiss Direct Real Estatementioning

confidence: 99%

What is the “duration” of Swiss direct real estate?

Constantinescu

2010

J of Property Inv & Finance

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Purpose -Computing the duration of real estate assets is a challenging task due to the particularities of the property market. This paper aims to develop an empirical model to compute the interest-rate sensitivity of direct real estate assets in the Swiss multifamily housing market.Design/methodology/approach -An aggregated total return index is used to empirically estimate the interest-rate sensitivity of the underlying assets in a dynamic DCF model. No instantaneous change is computed but a long-run price adjustment.Findings -The long-run sensitivity is computed to be roughly 4.5 per cent. The value is found to be statistically significant at the 1 per cent level. The model is estimated over two different time periods and the estimate remains significant over both periods with value changing marginally. Potential reliance of trends when forming expectations is found to be present.Research limitations/implications -One limitation is that the computed value is valid for a portfolio having a similar composition with the index used for the empirical estimation.Practical implications -The value of the interest-rate sensitivity places Swiss direct real estate assets within the European range. The value may be used to compute the risk-based capital of an institutional investor in as far as the portfolio is similar in composition with the index.Originality/value -The use of the dynamic DCF model allows one to split the changes in asset prices in changes from interest-rates and changes from cashflows. No value was previously available for the market of Swiss multifamily properties. What is the duration of AbstractThe appeal of the duration concept comes from its simplicity and wide-use in portfolio immunization. Various duration measures are available for fixed income securities with predefined cash flows or interest-rate dependent cash flows. Real estate shares some features with fixed-income securities (relatively stable cash-flows) but it also has very distinct properties (no fixed maturity, possibility to "upgrade" the asset through investment). Furthermore Swiss rental real estate is particular within the real estate universe due to the existing legal restriction of the rent revising process. This implies that the standard duration measures developed for bonds need some adjustments when used with real estate assets. In this paper I try to develop an empirical measure of interest rate sensitivity for the Swiss direct residential real estate market starting from the dynamic DCF model of Campbell and Shiller. The estimated long-run sensitivity of direct real estate investments as proxied by the IAZI index with respect to the Swiss Confederation bond yield is of -

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Section: "Duration" Of Swiss Direct Real Estatementioning

confidence: 99%

What is the “duration” of Swiss direct real estate?

Constantinescu

2010

J of Property Inv & Finance

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“…Hoesli and MacGregor (2000) state that weight allocated to property in institutional portfolios is usually inversely related to the importance of the residential owner‐occupied sector. Besides, Montezuma and Gibb (2003) draw attention to the fact that countries with higher financial institutional ownership tend to have more institutional involvement with the private rented housing (e.g. Switzerland, The Netherlands, the USA, Sweden).…”

Section: Housing As An Investment Assetmentioning

confidence: 99%

“…In fact, the British behaviour could be largely due to cultural attitudes to residential property investment. The relatively recent (post 1988) emergence of the necessary conditions for a modern deregulated private sector in the UK and the subsequent reduction in political risk implies that the sector, and corresponding opportunities may only now be emerging (Montezuma and Gibb, 2003). The new Housing Act of 1988 replaced the rigid rent control with a regime of market‐related rents for new tenancies.…”

Section: Housing As An Investment Assetmentioning

confidence: 99%

“…Montezuma and Gibb (2003) evaluate direct residential as an institutional asset group in three European countries (Switzerland, The Netherlands and Sweden) where the involvement of institutional investors in the private rented sector is significant compared with other countries in Europe. The three criteria used to evaluate residential property as an institutional group include:private rental market value relative to institutional wealth;mean‐variance performance; andhedge against inflation.Regarding the first criteria the authors find that the value of the potential private rental market is sufficiently large to provide institutional diversification benefits.…”

Section: Diversification Benefits Of Residential Property For Institutional Investorsmentioning

confidence: 99%

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Housing investment in an institutional portfolio context

Montezuma

2004

Property Management

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Residential property in a multi‐asset portfolio context has been considered from two substantially different perspectives: institutional investor's and the household's perspective. This paper constitutes the first of two related surveys on the role of residential property in a multi‐asset portfolio. The paper provides an introduction to housing property investment at a macro level and reviews the main empirical issues related to housing investment in an institutional portfolio context. The literature in this regard generally supports the evidence that residential property is a more effective hedge against inflation than both shares and bonds. Additionally, the reviewed studies generally report that unsecuritised housing investment not only generates risk‐adjusted returns comparable to those of bonds and shares, but also exhibits low levels of correlation with classic asset groups of institutional portfolios.

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“…However, the availability of land is of critical importance to the development process and must be strictly adhered to (Cadman and Topping, 1996). Unlike what obtains in other markets, the product in property implies "change of land use" or an "alteration to an existing building" in combination with other factors of productionlabour (Healey, 1992;Montezuma and Gibb, 2006); materials (Ball and Grilli, 1997); and finance (Delaney and Hayward, 1994;Adair et al, 2007).…”

Section: Introductionmentioning

confidence: 99%

Property development and the unresolved housing issue in northern Nigeria

Madichie

Madichie²

2016

AJEMS

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Purpose The purpose of this paper is to highlight the challenges of property development and management in northern Nigeria drawing upon the experiences of Bauchi, Gombe and Kaduna states. Design/methodology/approach Based on a longitudinal evaluation of these trends and challenges, this study draws upon a literature review and practitioner insights on property investment efforts in northern Nigeria. It also benefits from insider accounts related to the author’s 20-years’ experience of work both in both Nigeria and the UK. Findings The study highlights the salient factors that have brought about the housing challenges in northern Nigeria. Arguably poor property development and management initiatives have had direct correlations with the weak property management practices in these states and thereby further restricted investments in the real-estate sector in northern Nigeria. Research limitations/implications The limitations of the study are based on those attributable to personal observation and ethnographic studies as adopted in this case. This impacts upon the generalisability of the findings, however, sound the propositions may be. Areas for future research inquiry are also proffered. Originality/value The study is a critical reflection of developments in property management taken from the purview of the Nigerian real-estate market. While primarily a viewpoint paper, it does highlight some of the key challenges facing property management in a manner not previously discussed in the literature.

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

Cited by 7 publications

References 22 publications

What is the “duration” of Swiss direct real estate?

What is the “duration” of Swiss direct real estate?

Housing investment in an institutional portfolio context

Property development and the unresolved housing issue in northern Nigeria

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