Macroeconomy and Real Estate Cycles

Colin A. Jones () and Edward Trevillion ()
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Colin A. Jones: Heriot-Watt University
Edward Trevillion: Heriot-Watt University

Chapter Chapter 3 in Real Estate Investment, 2022, pp 43-61 from Springer

Abstract: Abstract There is a clear link between the performance of the macroeconomy and the real estate market. In this context, the chapter explores the close link between the macroeconomy and real estate cycles. The dynamic nature of the real estate market is explained in reference to underlying economic forces and the incidence of cycles. The fundamental economic determinants of real estate change are considered and their links to development activity. The significance of cycles to real estate markets is demonstrated through documented examples in an international history. From this base, a model of the cycle of commercial property development, distinct from the business cycle, is set out. Commercial real estate cycles are supported and indeed can be generated by credit availability. Variability in finance per se and changes to gearing can generate real estate cycles through their impact on yields. In this context, there is a discussion of how real estate cycles can be generated by the availability of investment funds alone, based on the real estate boom of the 2000s. The final section of the chapter considers the role of sentiment influencing the repetition of cycles and the failure of forecasting.

Keywords: Real estate in the economy; Commercial real estate cycles; Development time lags; Skyscrapers; Development cycles; Finance and investment cycles; Forecasting (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-031-00968-6_3

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DOI: 10.1007/978-3-031-00968-6_3

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