Nowhere to Go but Up: A Study of Listed Real Estate Sensitivity to Changes in Interest Rates
29 Pages Posted: 14 Mar 2017
Date Written: February 2017
This study re-examines the sensitivity of global listed real estate markets to changes in market and Central Bank interest rates with respect to both their returns and volatility. Specifically the paper considers the recent period of relaxing monetary policies in the countries with the largest global listed real estate markets. The results confirm importance of the market interest rates in explaining daily changes in listed real estate prices. The significant results are dominated by the interest rates with longer maturity which reflects the common notion of real estate sector’s exposure to the long-term financing. The paper covers the recent Global Financial Crisis and finds that the significant findings are not crisis-driven. The significance of the interest rate factors weakens during the most recent period of 2007-2015 when the countries in our sample implement expansionary monetary policy. Finally, the results of this paper are robust to the alternative specifications with additional control variables.
Keywords: Listed Real Estate, REITs, International Real Estate, Interest Rate Risk
JEL Classification: G12, G15, E43
Suggested Citation: Suggested Citation