REITs and Liquidity in Real Estate Markets

34 Pages Posted: 8 Jul 2016 Last revised: 30 Nov 2020

See all articles by Kiat Ying Seah

Kiat Ying Seah

National University of Singapore (NUS)

James D. Shilling

DePaul University; National Bureau of Economic Research (NBER)

Tien Foo Sing

National University of Singapore (NUS) - Department of Real Estate

Long Wang

National University of Singapore (NUS)

Date Written: July 5, 2018

Abstract

Is setting up a real estate investment trust (REIT) regime a zero-sum game? Using a unique set of institutional real estate investment data from 146 countries (including 59 countries with a REIT regime) for 2001 to 2014, we find significant increases in investments in local real estate markets of 25.3% in terms of transaction value and 18.0% in terms of transaction volume after countries set up a REIT regime. The increases are more than enough to offset the reductions in foreign real estate investments of 11.2% and 7.4% in transaction value and volume, respectively. Our evidence suggests that the declines in foreign investments are motivated by foreign investors seeking liquidity by switching their real estate investments to REITs. The liquidity benefit associated with a REIT regime is also supported by evidence of reduced stock market volatility and higher comovements of local stock returns with global REIT returns. The findings help allay apprehensions among policymakers that a REIT regime may reduce investments in local real estate markets.

Keywords: Liquidity, Transparency, Efficiency, REIT Regime, Cross-border Real Estate Investments, Foreign Investors

JEL Classification: G15, G29, R3

Suggested Citation

Seah, Kiat Ying and Shilling, James D. and Sing, Tien Foo and Wang, Long, REITs and Liquidity in Real Estate Markets (July 5, 2018). Available at SSRN: https://ssrn.com/abstract=2804913 or http://dx.doi.org/10.2139/ssrn.2804913

Kiat Ying Seah

National University of Singapore (NUS) ( email )

1E Kent Ridge Road
NUHS Tower Block Level 7
Singapore, 119228
Singapore

James D. Shilling

DePaul University ( email )

1 East Jackson Blvd.
Chicago, IL 60604
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Tien Foo Sing (Contact Author)

National University of Singapore (NUS) - Department of Real Estate ( email )

4 Architecture Drive
Singapore 117566
Singapore

Long Wang

National University of Singapore (NUS) ( email )

1E Kent Ridge Road
NUHS Tower Block Level 7
Singapore, 119228
Singapore

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