Inhoudsopgave
Lecture 1 – introduction ................................................................................................................ 3
Why study real estate? ..................................................................................................................... 3
Stylized facts ................................................................................................................................... 5
How to measure the evolution of house prices? ................................................................................ 9
Lecture 2 – house price models .................................................................................................... 15
Housing supply ..............................................................................................................................16
Simple “user cost” model ...............................................................................................................19
Ability to pay model ........................................................................................................................21
Four-quadrant model .....................................................................................................................23
Lecture 3 – Models (cont.) & Policy ............................................................................................... 27
Monocentric city model ..................................................................................................................27
Policy: stimulating homeownership .................................................................................................29
Policy: Rent Regulation ...................................................................................................................35
Lecture 4&5 – Valuation ............................................................................................................... 40
Sales comparison approach ...........................................................................................................41
Income approach ...........................................................................................................................43
Reconciliation: Sales Comparison and Income Capitalization Approaches........................................48
Cost approach ...............................................................................................................................49
Lecture 6&8 – Investments ........................................................................................................... 50
How does the level of debt affect the IRR? .......................................................................................55
Investments in climate change mitigation ........................................................................................57
Lecture 7 – guest lecture Inclusio ................................................................................................. 60
Social impact .................................................................................................................................60
Environmental impact ....................................................................................................................60
Partnership structure ......................................................................................................................61
Legal framework .............................................................................................................................62
Impact investment .........................................................................................................................63
Shareholders .................................................................................................................................63
Economic model ............................................................................................................................64
Strategy and investment criteria ......................................................................................................67
Portfolio in operation ......................................................................................................................68
Affordable housing .........................................................................................................................68
Lecture 9 – real options and supply............................................................................................... 70
Real options ...................................................................................................................................70
Supply ...........................................................................................................................................73
, Does adding to the supply of market-rate housing lead to increases, decreases or changes in the rate of
increase in rents? ...........................................................................................................................76
Does new housing make existing housing more affordable through filtering or chain moves? ..............78
Broader effects of limiting housing supply ........................................................................................81
Lecture 10 – doing research in real estate economics .................................................................... 83
What is a PhD? ...............................................................................................................................83
The EPC question: did the policy work? ............................................................................................84
How do we know what causes what? ...............................................................................................86
Difference-in-differences (DiD)........................................................................................................88
Regression discontinuity (RDD) .......................................................................................................89
Back to the EPC: what did we find? ..................................................................................................90
Exercise – rent or buy in Flanders? ...................................................................................................95
Wrap-up ........................................................................................................................................97
,Lecture 1 – introduction
Why study real estate?
- Real estate is the most significant store of wealth
- Everyone will make large decisions related to real estate: renting compared to
buying? Is renting throwing away money?
- Homeownership is dominant tenure type in many countries
- Houses are THE asset of the bottom 90%
A) Poorest 50% of US à the housing of
these people is financed with debt, they
don’t own a lot of other stocks; net equity
position is indicated by the red line
B) These are the above average wealth
people, they also have a lot of housing
assets, financed with mortgages, but they
also own stocks and bonds
C) Top 10% is financed with mortgage
debt, but this is only a very small part, they
also have bonds and stock assets
- Wealth growth from asset prices
Comparison from before
and after financial crisis
Bottom 50%: before
crisis, wealth growth was
relatively larger because
they owned real estate
Top 10%: after crisis,
they still had wealth
growth because of
stocks
, - Housing IS the business cycle
For some people, housing is the business cycle
Recessions are being indicated with the grey blocks
The dark black line indicates how housing is
contributed to gdp
Decreasing black line; less housing was starting and
housing was subtracted from gdp
(before recession, there was a decrease) à
example: 9/11 recessions were decreasing;
BUT, also false negatives and false positives
False negatives explanations:
- 1953: end of the korean war à change in defense spending what caused a
recession, but it was not caused by the real estate market
- 2001: dotcom bubble; was more a consumer crisis and not a real estate crisis
False positive; there was a decrease, but is was nog followed by a recession
- 1950: Start of spending for the korean war
- +- 1966: Increase in defense spending
- Interest rates affect housing starts
Housing is also affected by monetary
policy
When interest rates decrease, housing
starts are rising
Monitary policy is able to affect housing
starts
Lecture 1 – introduction ................................................................................................................ 3
Why study real estate? ..................................................................................................................... 3
Stylized facts ................................................................................................................................... 5
How to measure the evolution of house prices? ................................................................................ 9
Lecture 2 – house price models .................................................................................................... 15
Housing supply ..............................................................................................................................16
Simple “user cost” model ...............................................................................................................19
Ability to pay model ........................................................................................................................21
Four-quadrant model .....................................................................................................................23
Lecture 3 – Models (cont.) & Policy ............................................................................................... 27
Monocentric city model ..................................................................................................................27
Policy: stimulating homeownership .................................................................................................29
Policy: Rent Regulation ...................................................................................................................35
Lecture 4&5 – Valuation ............................................................................................................... 40
Sales comparison approach ...........................................................................................................41
Income approach ...........................................................................................................................43
Reconciliation: Sales Comparison and Income Capitalization Approaches........................................48
Cost approach ...............................................................................................................................49
Lecture 6&8 – Investments ........................................................................................................... 50
How does the level of debt affect the IRR? .......................................................................................55
Investments in climate change mitigation ........................................................................................57
Lecture 7 – guest lecture Inclusio ................................................................................................. 60
Social impact .................................................................................................................................60
Environmental impact ....................................................................................................................60
Partnership structure ......................................................................................................................61
Legal framework .............................................................................................................................62
Impact investment .........................................................................................................................63
Shareholders .................................................................................................................................63
Economic model ............................................................................................................................64
Strategy and investment criteria ......................................................................................................67
Portfolio in operation ......................................................................................................................68
Affordable housing .........................................................................................................................68
Lecture 9 – real options and supply............................................................................................... 70
Real options ...................................................................................................................................70
Supply ...........................................................................................................................................73
, Does adding to the supply of market-rate housing lead to increases, decreases or changes in the rate of
increase in rents? ...........................................................................................................................76
Does new housing make existing housing more affordable through filtering or chain moves? ..............78
Broader effects of limiting housing supply ........................................................................................81
Lecture 10 – doing research in real estate economics .................................................................... 83
What is a PhD? ...............................................................................................................................83
The EPC question: did the policy work? ............................................................................................84
How do we know what causes what? ...............................................................................................86
Difference-in-differences (DiD)........................................................................................................88
Regression discontinuity (RDD) .......................................................................................................89
Back to the EPC: what did we find? ..................................................................................................90
Exercise – rent or buy in Flanders? ...................................................................................................95
Wrap-up ........................................................................................................................................97
,Lecture 1 – introduction
Why study real estate?
- Real estate is the most significant store of wealth
- Everyone will make large decisions related to real estate: renting compared to
buying? Is renting throwing away money?
- Homeownership is dominant tenure type in many countries
- Houses are THE asset of the bottom 90%
A) Poorest 50% of US à the housing of
these people is financed with debt, they
don’t own a lot of other stocks; net equity
position is indicated by the red line
B) These are the above average wealth
people, they also have a lot of housing
assets, financed with mortgages, but they
also own stocks and bonds
C) Top 10% is financed with mortgage
debt, but this is only a very small part, they
also have bonds and stock assets
- Wealth growth from asset prices
Comparison from before
and after financial crisis
Bottom 50%: before
crisis, wealth growth was
relatively larger because
they owned real estate
Top 10%: after crisis,
they still had wealth
growth because of
stocks
, - Housing IS the business cycle
For some people, housing is the business cycle
Recessions are being indicated with the grey blocks
The dark black line indicates how housing is
contributed to gdp
Decreasing black line; less housing was starting and
housing was subtracted from gdp
(before recession, there was a decrease) à
example: 9/11 recessions were decreasing;
BUT, also false negatives and false positives
False negatives explanations:
- 1953: end of the korean war à change in defense spending what caused a
recession, but it was not caused by the real estate market
- 2001: dotcom bubble; was more a consumer crisis and not a real estate crisis
False positive; there was a decrease, but is was nog followed by a recession
- 1950: Start of spending for the korean war
- +- 1966: Increase in defense spending
- Interest rates affect housing starts
Housing is also affected by monetary
policy
When interest rates decrease, housing
starts are rising
Monitary policy is able to affect housing
starts
