Tackling the Zero Flows: A Study of Foreign Real Estate Investment Across Global Cities

Rong Wang, Anupam Nanda and Eero Valtonen

ERES from European Real Estate Society (ERES)

Abstract: This research aims to estimate the determinants of foreign real estate investment (FREI) at the global city level. A dataset comprising bilateral real estate investment flows between 715 pairs of global cities from 2007 to 2021 is utilised. International real estate investments frequently exhibit missing or zero observations during certain periods, resulting in spikes in capital flows between cities. This ""zero-problem"" is particularly pronounced at the city level. To address this challenge, the study employs Poisson Pseudo-Maximum Likelihood (PPML) within a gravity framework, which effectively accommodates zero capital flows. In addition, a Zero-Inflated Poisson (ZIP) model is utilised to further account for an excess of zero observations in FREI flows. The findings offer insights into the city-level dynamics of FREI flows and consistently confirm theoretical expectations around geographic distance (reducing FREI flows between cities) and economic size (positively influencing the bilateral flows of FREI).

Keywords: Foreign Real Estate Investment; Global City; Poisson Pseudo-Maximum Likelihood; Zero-Inflated Poisson (search for similar items in EconPapers)
JEL-codes: R3 (search for similar items in EconPapers)
Date: 2025-01-01
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