all lectures have been summarized and I have included extra explanations (from the literature) that can be useful in understanding the course better. This summary was more than enough to pass the exam. Finally, I added a small summary of all lecture weeks during the course.
IREM – lecture’s summary
Week Subject/theme Readings Assignments
1 Introduction TW C1
Trade Theory l TW C2/KOM 3+4/ GJ Ch. 3, prob
1/2/3
2 Trade Theory ll TW C2/KOM C5 CH. 4, prob 3
CH. 5, prob 1
Guest lecture Dirk Sosef -
3 Firms in the global economy KOM C8 Ch 8, prob 2 + 3
Theory on finance and investment TW C3/CFS/DL
4 Tutorial -
Listed/non-listed RES funds BH C11 + C12/BK/BVR
5 Guest lecture Arne Bongenaar -
Guest lecture Herman Kok -
6 - -
Guest lecture Ed Nozeman -
8 Deadline case
9 case presentations
Exam preparation
10 -
11 EXAM (18:45-20:45)
Contents
Week 01................................................................................................................................................... 2
Lecture 1.1 – introduction to international real estate markets ........................................................ 2
Lecture 1.2 – International trade theory (part 1 ............................................................................... 11
Week 02................................................................................................................................................. 26
Lecture 2.1 – international trade theory part 2 ................................................................................ 26
Lecture 2.2 - Guest lecture dirk Sosef (prologis) ............................................................................... 35
Week 03................................................................................................................................................. 43
Lecture 3.1 – firms in the global economy ........................................................................................ 43
Lecture 3.2 – Investment and finance theory ................................................................................... 54
Week 04................................................................................................................................................. 67
Lecture 4.1 – Unlisted real estate funds ........................................................................................... 67
Lecture 4.2 – Listed Real Estate Funds .............................................................................................. 73
Week 05................................................................................................................................................. 81
Lecture 5.1 – Guest Lecture Arne Bongenaar - Acteeum .................................................................. 81
Lecture 5.2 – Guest lecture Herman Kok – Ellandi ............................................................................ 83
Week 06................................................................................................................................................. 90
Lecture 6.1 – Guest Lecture Ed Nozeman ......................................................................................... 90
Rows per week (mini summary) ............................................................................................................ 99
,Week 01
Lecture 1.1 – introduction to international real estate markets
Course objectives
International housing and real estate market analysis from a global and comparative approach
1. Drivers of formation of international real estate markets
2. Operation of real estate markets in the global context and the role of governance and
institutions
3. Real estate market developments
Introduction
- Characteristics of real estate as an asset class
1. High value → out of reach for small investors to invest in one piece
Unlike stocks and bonds which can be divided in small parts. Real Estate has a high value
per unit.
2. Illiquid → high transaction costs
Comparing to stocks and bonds: Stocks and bonds can be liquidated or sold. With RE it is
harder. It has high transaction costs: Broker fees, taxes, valuation reports, etc.
3. Heterogeneous → high information cost
In practice we can rarely find RE that is the same.
4. Dual characteristics → consumption good (user space) and investment vehicle
Stock and bonds are an investment asset. You buy them as an investment. For RE it is not
only an investment asset but also a consumption good. You can also consume the service
that is provided by RE: for residential use or as an office. Demand comes from two sides:
the use of space, and investors.
Stylized facts of international real estate market
Global asset market and local space market
This means that RE is approachable for investors from other countries than the country in which the
RE is located. Because properties cannot be relocated, they belong to the local space market.
You see that the majority of the users are Dutch. However there are also international renters. This
means that these properties are not only owned by international businesses but also used
What you can see here is that the attractiveness of the Zuidas area is not only for investors of the
domestic country, but the Zuidas is attractive to investors all over the world.
So we know the owners: They are international. We also know the place: It is the Zuidas in the
Netherlands. But who are the users of the space?
,You see that the majority of the users are Dutch. However there are also international renters. This
means that these properties are not only owned by international businesses but also used by
internationals. Home bias: you see many Dutch investors in the Dutch RE market: because simply they
know the market better and also the regulations/legislation.
Stylized facts of international real estate market
Real estate market cycles = price leads the volume
Risky markets move by cycles. In a different stage of
the cycle the market moves differently. What you
see here is the housing market cycle. The blue line
represents the price and the orange line represents
the sales volume. What you can see here is that the
sales cycle is leading the price trend. When you see
that the price is going up, you see that the volume
goes down. The prices keep going up but when the
volume keeps going down they start to realize that
this might be the turning point. The prices will
lower. So, this means that the sales volume can
serve as an indicator of the turning point of the
market prices. This happens in the residential RE market.
Here you see the other sectors (offices, retail, industrial, residential dwellings). What is visible here,
although it is not a full cycle, what you can see is that for most of the markets: They start to tend
downward from 2008. In 2014 it starts to recover again.
Stylized facts of international real estate market
Direct and indirect real estate investment
, As said before RE has high value which means it can be inaccessible for small investors. If you want to
get exposure as a small investor you can get yourself into an indirect investment. You can invest a
small amount of money in a fund and the fund will collect all the small amounts of money from small
investors to acquire RE from it. The small investors now have exposure from RE in their small
portfolio’s. So you can invest indirect and direct. This figure is a classification of the RE investment
into different areas of the world. This is how their asset is distributed globally.
In terms of indirect RE investment you can buy
into funds. So, for example in CBRE global
investors. You can also buy into private equity
funds (closed-ended funds). That is more
demanding in comparison to other funds. In
private equity funds you need to know they
mostly belong to wealthy individuals or
companies that have a lot to invest. They have a
limited number of partners in the private equity
funds. There are life definition of the duration of
how long the fund will exist. After that the fund
must stop or cease to exist. And the participating
parties of this fund will get the remaining interest.
In this graph you see a lack between the
fundraising and the investment volume: fundraising happens first and investing later.
We will talk about funds more, later. What you need to understand is: The fund industry is very
global. The yellow line represents the fundraising for the private equity funds. The grey bar represents
the RE extra deals.
Overview of international real estate markets
If we look at international RE markets we see that the
sizes are very different. So we can divide the world in
various markets and these markets are very diverse.
This is the average of volume over 6 – 7 years for
different regions. UK used to be one of the most
popular areas to invest, but right now this has flipped
due to Brexit.
Asia has become more popular.
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