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Kirill Pomogajko / Michael Voigtländer IW-Trends No. 1 25. March 2011 The Convergence of Real Estate Cycles

A Factor Analysis

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The Convergence of Real Estate Cycles
Kirill Pomogajko / Michael Voigtländer IW-Trends No. 1 25. March 2011

The Convergence of Real Estate Cycles

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A Factor Analysis

The diversification of risks is an essential aspect for property investors. One possibility to reduce portfolio risks is the acquisition of international property. However, globalization has induced a convergence of business cycles so that the differences in real estate cycles are questionable. Moreover, the monetary integration in Europe has brought in line nominal short-term interest levels for European investors. In this study the co-movement of office and housing cycles is tested for European markets by using a factor analysis. The results show that office cycles are highly synchronized. Housing markets are by contrast less integrated. Especially markets with a low homeownership rate, like the German, Dutch and Swiss market, stand out. The monetary integration has only a minor impact on cycles for offices and for housing.

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The Convergence of Real Estate Cycles
Kirill Pomogajko / Michael Voigtländer IW-Trends No. 1 25. March 2011

The Convergence of Real Estate Cycles

Download PDF

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