Are There Investor Clienteles in Rental Housing?

Gavin Wood and Yong Tu

Real Estate Economics, 2004, vol. 32, issue 3, 413-436

Abstract: The possible existence of investor clientele groups has received little attention in the real estate finance literature. In this paper we develop a clientele model, which in equilibrium produces a clustering of investors by tax characteristics. Low‐tax‐bracket investors are concentrated in low‐value rental housing that attracts rents which are high in relation to property values. On the other hand, only high‐tax‐bracket investors will be observed in high‐value rental housing, and they charge rents that are low in relation to property values. An empirical model is specified and estimated using a cross section of investors in Australian private rental housing markets. Investor clienteles are detected among property investors, though there is a weak diversification effect indicating that clientele effects may be stronger among single property investors.

Date: 2004
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