The role of listed REITs in global interdependence, business cycles and real estate market

Noriko Ashiya

ERES from European Real Estate Society (ERES)

Abstract: It is widely accepted that REITs provide a range of important benefits to companies and investors; if listed on the main market of the stock exchange, they also provide all the other usual benefits associated with the equity market such as access to new investors/capital, tax transparency, access to property for minimal outlay, portfolio diversification, liquidity, and so on. In this paper, we take a global view of those aspects and investigate the role of listed REITs in global interdependence, business cycles and real estate markets. For this purpose, we extend the traditional Keynesian international macroeconomic model, presented by Branson and Buiter (1983), in two stages and formulate an example of a recent international economy with expanded securitization markets. Then we use it to investigate the impacts of the foreign interest rate hike, one of the many typical influences from foreign countries, on the business fluctuations of the home country; the impact of which we compare with those before the world wide starts of the listed REITs market. It is found that REITs, widely held by a variety of investors, may weaken the impact of a foreign influence and they may reduce the fluctuations of the value of the Gross Domestic Product. Given the familiar relationship between land prices and the GDP, this finding could also be seen as an insight into the future prospect of land prices, as well as the future real estate markets.

JEL-codes: R3 (search for similar items in EconPapers)
Date: 2012-01-01
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