John V. Duca, Martin Hoesli and Joaquim Montezuma
The study aims to analyze the effects of the Covid-19 pandemic on house prices.
Abstract
Purpose
The study aims to analyze the effects of the Covid-19 pandemic on house prices.
Design/methodology/approach
The authors start by discussing the possibility that house price indexes may not fully incorporate the effects of the pandemic as of yet. Against the background of the pandemic, the authors then analyze economic and behavioral effects affecting house prices. The authors also discuss how the linkages between tourism and house prices have been affected. The authors further present evidence of an emerging shift in preferences from urban locations to more peripheral ones.
Findings
The authors report variance in the evolution of house prices across countries at the onset of the pandemic, with locations depending heavily on tourism showing slower price appreciation while appreciation has firmed in other places. The authors argue that the resilience of house prices is not only because of the low-interest rate environment and government efforts to support firms and households, but also behavioral factors. In some locations, the price of condominiums has declined relative to the price of detached houses. This could indicate that wealthier households are seeking more space and larger units as a result of the crisis. There is also evidence of a downward pressure on rents, leading to increased price–rent ratios in the USA.
Originality/value
By considering both economic and behavioral factors, this paper provides for a better understanding of the resilience and realignment of house prices at the onset of the Covid-19 pandemic.
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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…
Abstract
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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This second of two related papers in this Journal, reviews empirical evidence available from the literature on the problem of household's optimal portfolio when owner‐occupied…
Abstract
This second of two related papers in this Journal, reviews empirical evidence available from the literature on the problem of household's optimal portfolio when owner‐occupied housing is included in the list of available assets, namely the risk‐return performance of residential investment, and its usefulness in efficient mixed‐asset portfolios. The risk‐return characteristics of the housing asset is highly dependent on the type of perspective under analysis (household or institutional investor's perspective) and therefore, the two housing investment approaches could lead to different conclusions about the role of housing investment in an portfolio context. The consumption demand for housing together with the markets imperfections place serious constraint on the household's portfolio problem.
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Yasmine Essafi Zouari and Aya Nasreddine
Over a long period, even low inflation has an impact on portfolio value and households’ purchasing power. In such a context, inflation hedging should remain an important issue for…
Abstract
Purpose
Over a long period, even low inflation has an impact on portfolio value and households’ purchasing power. In such a context, inflation hedging should remain an important issue for investors. In particular, long-term investors, who are concerned with the protection of their wealth, seek to hold effective hedging assets. This study aims to demonstrate that residential assets in “Grand Paris” are a hedge against inflation and particularly against its unexpected component.
Design/methodology/approach
In this study, the physical residential markets in 127 communes in Paris and the Parisian first-ring suburbs are considered as potential asset classes. We simplified the analysis by clustering the 127 communes into five homogenous groups using ascending hierarchical classification (AHC). Then, we test the hedging ability of these groups within a mixed asset portfolios using both correlation and regression analysis.
Findings
This paper presents an analysis of the “Grand Paris” housing market and its inflation hedging ability with comparison to other financial asset classes. Results show that the five housing groups act as a highly positive hedge against unexpected inflation. Furthermore, cash and bonds seem to provide, respectively, a partial and an over hedge against unexpected inflation. Stocks act as a perverse hedge against unexpected inflation and provide no significant hedge against expected inflation. Also, indirect listed real estate demonstrates little correlation with inflation, which makes us reject its hedging ability contrary to physical residential real estate.
Research limitations/implications
The inflation topic: although several researches exist that question the hedging property of real estate, very few concentrate on physical residential assets and to the best of the authors’ knowledge, this study is the only one that targets the “Grand Paris” area. Residential assets of the “Grand Paris” communes are confirmed to be a hedge against inflation and particularly against its unexpected component thanks to its capital appreciation rather than income one. Also, we show that the listed real estate in France (Sociétés d’Investissement Immobilier Cotée) does not provide the same hedging properties contrary to the US real estate investment trusts (REITs) who demonstrate this ability. Listed real estate could thus not be used interchangeably with housing to protect from inflation in the French market.
Practical implications
Protection of investors against inflation and in particular in the face of its return to France in 2022. Reassuring promoters and investors of the interest of residential investment projects in “Greater Paris” and of the potential that this holds.
Social implications
Inflation takes a chunk out of the purchasing power of money and thereby erodes the real value of people’s finance. Investors and households who seek protection from inflation erosion should invest in direct housing, and in particular within areas that are experiencing an effective metropolization process.
Originality/value
The originality of the study is precisely relative to the geographical area studied. The latter has experienced favorable economic conditions for several years and offers interesting fundamentals to explore and exploit in investment strategies that prove capable of protecting against imminent inflation. The database is specific to this project and has been built through the compilation of several sources and with the support of BNP Paribas Real Estate.
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Antônio Jeovah de Andrade Meireles, João Alfredo Telles Melo and Magnólia Azevedo Said
The present study evaluates the principal forms of socioenvironmental damage suffered by local traditional populations and indigenous communities as a result of the installation…
Abstract
The present study evaluates the principal forms of socioenvironmental damage suffered by local traditional populations and indigenous communities as a result of the installation and operation of the Pecém Industrial and Shipping Complex. The main problem being pollution in the municipalities of São Gonçalo do Amarante and Caucaia, which is in the Brazilian state of Ceará. As a theoretical framework, we use the concept of “environmental justice,” and “environmental racism.” The latter were used to understand the process of “deterritorialization” of these communities that resulted in extensive impacts on the natural environment, as well as the way of life and productive practices of these communities. Our analyses confirm the destruction of the means that allow noncapitalist exploitation of natural resources, such as artisanal fisheries, subsistence farming, and the use of commons. We show how all these processes are constitutive of environmental injustice and environmental racism. These may contribute to the organization of the resistance and struggle of the affected populations, namely indigenous peoples and traditional communities.