Dynamics between Direct Industrial Real Estate and the Macroeconomy: An Empirical Study of Hong Kong
Pricing of direct industrial real estate (DIRE) has long been under-researched due to the paucity of analysable data. Compared to other types of real estate, DIRE has often been regarded as more inefficient because of information asymmetry amongst market players stemming from a lack of market transp...
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| Format: | Article |
| Language: | English |
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MDPI AG
2022-09-01
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| Series: | Land |
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| Online Access: | https://www.mdpi.com/2073-445X/11/10/1675 |
| _version_ | 1797407053014106112 |
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| author | Daniel Lo Yung Yau Michael McCord Martin Haran |
| author_facet | Daniel Lo Yung Yau Michael McCord Martin Haran |
| author_sort | Daniel Lo |
| collection | DOAJ |
| description | Pricing of direct industrial real estate (DIRE) has long been under-researched due to the paucity of analysable data. Compared to other types of real estate, DIRE has often been regarded as more inefficient because of information asymmetry amongst market players stemming from a lack of market transparency. Therefore, pricing of DIRE usually does not follow a random walk and should be more predictable than other types of real estate. Along this line of reasoning, this study empirically investigates the causal relationships between the price-to-rent ratio of DIRE and macroeconomic attributes using cointegration and causality techniques. More specifically, we employ data on the market of Hong Kong to investigate the lead-lag relationships between the price-to-rent ratio of DIRE and a wide spectrum of macroeconomic and financial indicators, including inflation, money supply, national income, exchange rates, performance of housing market and other economic indicators specific to the industrial sector. The results of our statistical tests reveal significant evidence that DIRE is generally moving in syncs with other segments of the economy over time in terms of long-term cointegration. Further, DIRE tends to lag behind the overall macroeconomy in terms of Granger causation with the price-to-rent ratio exhibiting varying lengths of time lag with the macroeconomic determinants. The findings of the study carry important implications for informing property valuation practices and industrial land policy, particularly in designing urban revitalization programmes aimed at optimising industrial land use. |
| first_indexed | 2024-03-09T03:35:41Z |
| format | Article |
| id | doaj.art-941cf04b02e4472f9e0fefa131c1cbc6 |
| institution | Directory Open Access Journal |
| issn | 2073-445X |
| language | English |
| last_indexed | 2024-03-09T03:35:41Z |
| publishDate | 2022-09-01 |
| publisher | MDPI AG |
| record_format | Article |
| series | Land |
| spelling | doaj.art-941cf04b02e4472f9e0fefa131c1cbc62023-12-03T14:49:30ZengMDPI AGLand2073-445X2022-09-011110167510.3390/land11101675Dynamics between Direct Industrial Real Estate and the Macroeconomy: An Empirical Study of Hong KongDaniel Lo0Yung Yau1Michael McCord2Martin Haran3Faculty of Computing, Engineering and the Built Environment, Ulster University, Newtownabbey BT37 0QB, UKDepartment of Sociology and Social Policy, School of Graduate Studies, Lingnan University, Hong KongFaculty of Computing, Engineering and the Built Environment, Ulster University, Newtownabbey BT37 0QB, UKFaculty of Computing, Engineering and the Built Environment, Ulster University, Newtownabbey BT37 0QB, UKPricing of direct industrial real estate (DIRE) has long been under-researched due to the paucity of analysable data. Compared to other types of real estate, DIRE has often been regarded as more inefficient because of information asymmetry amongst market players stemming from a lack of market transparency. Therefore, pricing of DIRE usually does not follow a random walk and should be more predictable than other types of real estate. Along this line of reasoning, this study empirically investigates the causal relationships between the price-to-rent ratio of DIRE and macroeconomic attributes using cointegration and causality techniques. More specifically, we employ data on the market of Hong Kong to investigate the lead-lag relationships between the price-to-rent ratio of DIRE and a wide spectrum of macroeconomic and financial indicators, including inflation, money supply, national income, exchange rates, performance of housing market and other economic indicators specific to the industrial sector. The results of our statistical tests reveal significant evidence that DIRE is generally moving in syncs with other segments of the economy over time in terms of long-term cointegration. Further, DIRE tends to lag behind the overall macroeconomy in terms of Granger causation with the price-to-rent ratio exhibiting varying lengths of time lag with the macroeconomic determinants. The findings of the study carry important implications for informing property valuation practices and industrial land policy, particularly in designing urban revitalization programmes aimed at optimising industrial land use.https://www.mdpi.com/2073-445X/11/10/1675price-to-rentindustrial real estatemacroeconomicsmarket efficiencyGranger causalityHong Kong |
| spellingShingle | Daniel Lo Yung Yau Michael McCord Martin Haran Dynamics between Direct Industrial Real Estate and the Macroeconomy: An Empirical Study of Hong Kong Land price-to-rent industrial real estate macroeconomics market efficiency Granger causality Hong Kong |
| title | Dynamics between Direct Industrial Real Estate and the Macroeconomy: An Empirical Study of Hong Kong |
| title_full | Dynamics between Direct Industrial Real Estate and the Macroeconomy: An Empirical Study of Hong Kong |
| title_fullStr | Dynamics between Direct Industrial Real Estate and the Macroeconomy: An Empirical Study of Hong Kong |
| title_full_unstemmed | Dynamics between Direct Industrial Real Estate and the Macroeconomy: An Empirical Study of Hong Kong |
| title_short | Dynamics between Direct Industrial Real Estate and the Macroeconomy: An Empirical Study of Hong Kong |
| title_sort | dynamics between direct industrial real estate and the macroeconomy an empirical study of hong kong |
| topic | price-to-rent industrial real estate macroeconomics market efficiency Granger causality Hong Kong |
| url | https://www.mdpi.com/2073-445X/11/10/1675 |
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