A comparative framework for commercial and residential markets

Graham Ive and Regina FangYing Lin

ERES from European Real Estate Society (ERES)

Abstract: In the analysis of property markets, most research focuses on either the commercial or the housing sectors. Each body of literature has developed its own stylised factsí about normal values for such things as income yields and price elasticities of supply, around which cyclical models have been built. However, what is treated as normal in one sector may appear as unusual and requiring special explanation when viewed from the perspectives of the other. This work provides a matrix and organized framework to compare these two property sectors, residential and commercial, using a 4-marketsframework familiar in analysis of commercial property (Ball et al, 1998): user-occupier market; investor-owner market; developer market; and land market ìì all in the context of the broader financial markets. The approach applied in this research is comparative analysis of ratios, in their means, trends and cyclical components. More than one data resource is used: UK government official public data from 1970; mortgage lendersí data; IPD UK data from 1970 for commercial market; IPD UK data from 2001 for investment residential property; company accounts data on developersí profitability and cost structure.. The output of this research provides a comparative framework and model that might be useful in systemic thinking about the problems of regulating and making business decisions in housing and commercial markets and for generating more questions about the changing property economic environment in a comparative way. Last but not least, this paper aims to contribute to the literature seeking to develop a better understanding of property cycles.

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