Revisiting Investability of Heritage Properties through Indexation and Portfolio Frontier Analysis

Chin Tiong Cheng, Gabriel Hoh Teck Ling, Yee-Siang Gan, Wai Fang Wong and Kong Seng Lai
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Chin Tiong Cheng: Centre for Construction Research, Tunku Abdul Rahman University College, Setapak, Kuala Lumpur 53300, Malaysia
Gabriel Hoh Teck Ling: Faculty of Built Environment and Surveying, Universiti Teknologi Malaysia, Skudai 81310, Malaysia
Yee-Siang Gan: School of Architecture, Feng Chia University, Taichung 40724, Taiwan
Wai Fang Wong: Centre for Construction Research, Tunku Abdul Rahman University College, Setapak, Kuala Lumpur 53300, Malaysia
Kong Seng Lai: Centre for Construction Research, Tunku Abdul Rahman University College, Setapak, Kuala Lumpur 53300, Malaysia

Risks, 2021, vol. 9, issue 5, 1-16

Abstract: In recent years, the soaring prices of heritage properties in Georgetown, Penang have gained the attention of practitioners and investors. The practitioners claim that the prices of heritage properties within the core and buffer zones in Georgetown have increased more than 300% since the city was recognized as a UNESCO World Heritage site in 2008. Such heritage properties containing historical or art elements that lead to forming a diversified portfolio could exert a low correlation of returns with conventional assets. In addition, rehabilitation of heritage properties requires high restoration costs and conversion fees. Despite the above claims, there is an absence of empirical studies relating to heritage investability, particularly to prove whether the heritage properties are truly worth investing in. Thus, this study incorporates a self-developed heritage properties Index (PIHPI_HR) into the conventional investment portfolio for assessing diversification effects. This study has collected 853 units of transacted properties for constructing a 10-year price index (PIHPI_HR). Subsequently, its diversification effect was examined through the Efficient Frontier (EF), derived from the Modern Portfolio Theory (MPT). The findings have proven the optimization of the conventional portfolio by enabling investments in heritage properties where the return is higher than other investment assets at the same risk level. This study also unveiled the price movement of heritage properties together with their investment value, which is deemed to be useful for institutional investors and the public to formulate sustainable investment strategies in the future.

Keywords: heritage properties; price index; efficient frontier; diversified portfolio; conventional portfolio (search for similar items in EconPapers)
JEL-codes: C G0 G1 G2 G3 K2 M2 M4 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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