Chyi Lin Lee

The Politics of Foreign Investment in Australian Housing: Chinese Investors, Translocal Sales Agents and Local Resistance

This article analyses the cultural, housing and intergovernmental politics of individual foreign investment in Australian real estate. The first section provides a brief history of Australias housing system and shows the historical trend toward housing affordability ‘problems’ in Sydney and Melbourne. This review interrogates the claim Chinese investors compounded Australias housing affordability problem after the global financial crisis. The second more substantive section draws on interview, real estate website and media data to demonstrate how the Australian housing system and Chinese and Australian actors enabled Chinese investment in Australian real estate. The third section demonstrates how a minority of Australian residents and some journalists are contesting Chinese foreign investment in Australian real estate. This study shows how contemporary global real estate relations complicate the politics of Asian real estate investment in Anglo-sphere countries.

Housing price volatility and its determinants

Purpose - The purpose of this paper is to examine the housing price volatility for eight capital cities in Australia over 1987-2007. Specifically, the volatility of Australian housing and its determinants were investigated. Design/methodology/approach - An exponential-generalised autoregressive conditional heteoskedasticity (EGARCH) model was employed to analyse the volatility for eight capital cities in Australia. The Engle LM test was also utilised to examine the volatility clustering effects in these cities. Findings - The volatility clustering effects (ARCH effects) were found in many Australian capital cities. The importance of estimating each individual citys EGARCH model was also demonstrated in which the determinants of housing volatility vary from a city to another city. Asymmetric of the positive and negative shocks were also documented. Research limitations/implications - This study has implications for investors and policy makers in which housing investors should estimate the conditional variance (EGARCH process) of a housing market in respect to the volatility of housing series is not always constant over time. Furthermore, policy makers should also address the importance of considering the sub-national factors in formulating the national housing policy. The analysis and results are limited by the quality of the data. Originality/value - This paper is one of the few studies in housing volatility. Additionally, it is probably the first attempt to assess the volatility spillover effects in the Australian housing market.

The role of Malaysian securitised real estate in a mixed‐asset portfolio

Purpose – Previous studies on the Malaysian securitised real estate market have largely emphasised on performance analysis, whereas the importance of securitised real estate in asset allocation is largely ignored. Therefore, the purpose of this paper is to examine the role of Malaysian property shares and real estate investment trusts (REITs) in a mixed‐asset portfolio from 1991 to 2006.Design/methodology/approach – The mean‐variance and downside risk optimisations were utilised to assess the role of REITs and property shares in a mixed‐asset portfolio allocation. More specifically, the portfolio diversification potential and return enhancement benefits for both assets were examined.Findings – The results showed that property shares offer little diversification benefits or portfolio return enhancement, whereas the equally weighted REITs portfolio does provide some diversification benefits and return enhancements under the mean‐variance and downside risk frameworks. However, the benefits have diminished in...

Influence of the corporate social responsibility factors and financial factors on REIT performance in Australia

Purpose – Corporate social responsibility (CSR) has taken on increased stature and importance in recent years, as property investors have given an increased priority to environmental, social and corporate governance issues in their property investment decision‐making. The purpose of this paper is to empirically examine the impact of CSR factors and financial factors on the performance of Real Estate Investment Trusts (REITs) in Australia (A‐REITs) and assess whether these three CSR factors are separately priced by A‐REIT investors in uniquely adding value to A‐REIT investment performance.Design/methodology/approach – Using CSR rating factors and financial factors for the 16 A‐REITs in the ASX200, cross‐sectional multi‐factor models are employed to identify the separate pricing of these CSR factors in A‐REIT performance over 2005‐2010.Findings – The empirical results show that the environmental, social and corporate governance dimensions of CSR are not currently separately priced by A‐REIT investors, with ...

Hedging effectiveness of REIT futures

Purpose - The hedging effectiveness of real estate investment trust (REIT) futures as a critical issue in response to the global REIT market has been extremely volatile in recent years, however few studies have been placed on this area. This study aims to fill in this gap and examine the hedging effectiveness of Australian and Japanese REIT futures over 2002-2010. Design/methodology/approach - The analysis of this study involves two stages. The first stage is to estimate optimal hedge ratios. A variety of hedging methods is employed, including a traditional hedge, an ordinary least squares (OLS) model and a bivariate GARCH model. Thereafter, the hedging effectiveness of these strategies is assessed individually. Findings - The empirical results show REIT futures are effective hedging instruments in which a risk reduction of 37 per cent-78 per cent (34 per cent-52 per cent) for Australian (Japanese) REITs is evident. Importantly, the results also reveal that REIT futures outperform other hedging instruments in which a weaker risk reduction is found by stock, interest rate and foreign currency futures contracts. Moreover, the hedging effectiveness of REIT futures is dynamic and varies over time. Practical implications - The findings enable more informed and practical investment decision-making regarding the role of REIT futures in risk management. Originality/value - This paper, as far as the authors are aware, is the first study to offer empirical evidence of the risk-reduction effectiveness of REIT futures. The hedging effectiveness of REIT futures is also compared to other hedging instruments for the first time.

Housing in Australia as a portfolio investment

Purpose - The purpose of this paper is to examine the effectiveness of housing as a property investment vehicle. In this analysis, the performance and diversification benefits of housing over 1996-2007 are investigated. Design/methodology/approach - Sharpe and Sortino ratios were employed to assess the risk-adjusted performance of housing and major financial and real estate assets. Correlation analysis was also employed to examine the portfolio diversification benefits of housing. Findings - The study found that housing is an effective property investment vehicle in which it delivers the highest risk-adjusted returns and reveals negative correlation with major assets. The enhancement of these attractive features is also evident in recent years. Research limitations/implications - This study has implications for investor who seek to include housing as part of their portfolio. The analysis and results are limited by the quality of the data. Originality/value - This study is one of the few studies in housing investment, particularly the housing market in Australia. Additionally, this study is probably the first attempt to assess the downside risk of housing.

The Relationship between Housing Market Intervention for First-Time Buyers and House Price Volatility

Declining homeownership rates as observed in many western countries have direct and indirect implications for the broader economy; hence, governments have been seeking an effective solution to address this decline. One of the major challenges is the decline in overall homeownership rates with an increasing proportion of households deciding to rent rather than purchase. However, it is surprising that the impact on the housing market following the introduction of a first-time housing subsidy scheme has received relatively little attention. This study addresses this knowledge gap by examining the relationship between (1) housing market intervention based on first-time owner subsidies in a global city and (2) the level of house price volatility in the broader market. For example, the Australian government has implemented different policies designed to ease housing stress among first-time buyers; one high-profile policy was the First-time buyer Grant or First Home Owner Grant (FHOG) in which a cash payment or subsidy is given to new first-time buyers as a direct incentive. Based on a case study approach, an analysis is undertaken of the first-time buyer policy where an innovative approach using the E-GARCH model is employed to assess the effect of the scheme on the housing market. The findings indicated that the FHOG scheme offered a stabilisation effect on the housing market. In addition, there is evidence to support implementation of the FHOG scheme as an effective scheme to enhance housing affordability of first-time buyers. The findings offer a rare insight into the effectiveness of the FHOG scheme in enhancing housing affordability and also maintaining price stabilisation in the broader housing market.

Momentum Profits in Australian Listed Property Trusts

Abstract This paper examines the profitability of momentum trading strategies in Australian listed property trusts (LPTs). Monthly value-weighted momentum portfolios are formed using the monthly excess returns of LPTs for the period from 1990 to 2005. Overall the findings confirm that a momentum trading strategy in Australian LPTs is a profitable strategy. More specifically, momentum strategies are profitable after adjusting for variance and downside risk where the momentum returns substantially outperform the benchmark. An analysis using different study periods confirm the findings about momentum. The practical implication from this study is that investors can generate substantial abnormal returns by adopting a momentum trading strategy, particularly with a long strategy (i.e. winner portfolios).

The Impact of Alternative Assets on the Role of Direct Property in Australian Mixed-Asset Portfolios

Abstract Australian superannuation funds have increased their allocations to the alternative assets in recent years; this includes private equity, infrastructure, hedge funds and commodities. This raises the issue of whether this increased allocation to these alternative assets impacts on the strategic role and allocation of direct property in the Australian mixed-asset portfolio, due to the potential increased competition between these assets. This paper assesses the risk-adjusted performance and portfolio diversification benefits of direct property and various alternative assets over 1995–2009 and their role in optimal mixed-asset portfolios. While direct property is still seen to play a key role in the portfolio, direct property plays a less significant role in the portfolio when the alternative assets are included. In particular, Australian unlisted infrastructure and listed infrastructure are seen as key alternative assets across a significant portion of the portfolio risk spectrum. This is seen as validating the investment strategy of Australian superannuation funds who have significant exposure to the infrastructure sector.

The inflation-hedging characteristics of Malaysian residential property

Purpose - – This study aims to extend the current literature by examining the inflation-hedging effectiveness of Malaysian residential property in the short run and long run. Malaysia is an emerging market and has some unique characteristics. Therefore, a dedicated study in this market is critical. Design/methodology/approach - – The analysis of this study involves two stages. The first stage is to estimate the inflation-hedging ability of Malaysian residential property in the short run. The Fama and Schwert model was employed. Thereafter, the long-run inflation-hedging effectiveness was assessed by using a dynamic ordinary least squares (DOLS) model. Findings - – The Fama and Schwert tests reveal that Malaysian residential property does provide some satisfactory hedge against the expected inflation component over the short run. However, variations are evident among different types of residential property. The DOLS results provide strong evidence to support that housing is an effective hedge against the expected inflation in the long run, whereas no comparable evidence is found for the unexpected inflation component. Practical implications - – The findings enable more informed and practical investment decision-making regarding the role of housing in inflation risk management. Originality/value - – This paper is the first study to offer empirical evidence of the inflation-hedging attributes of Malaysian residential property. Moreover, the inflation-hedging effectiveness of different types of residential property is also compared for the first time.