Rental volatility in commercial property markets economics essay

Economics of the Property Market

The property market offers an economist an abundance of issues; boring it is not! Investors in commercial property can further reduce volatility through diversification.

For instance, we could analyse the relationship between housing equity the amount by which the value of property exceeds the loan s secured against it and household spending. If we take a British perspective, we might find ourselves analysing the seemingly crazy nature of residential house prices.

More specifically, can we explain the volatility of house prices and yet, at the same time, explain why over the longer term house prices have increased more quickly than the prices of consumer goods and services? It is argued that the willingness of lenders to sell parts of their mortgage book to other financial institutions, in other words, to sell the income yield of these mortgages, has meant that they have relaxed their lending criteria and extended their activities into riskier markets.

While property may be more illiquid than other asset classes, as the cornerstone of a well-diversified investment portfolio, property can deliver secure returns, with low volatility. A further overlay of diversity is offered by the very broad range of tenants and their relative financial prospects.

In the market at present, retail yields have softened as office and industrial yields have hardened. Do not assume that there is never a sting in the tail: Well, one can expect to study the determination of prices. Long lease contracts provide investors with a predictable long-term cash flow, often secured against strong or undoubted tenant covenants.

While the central London office investment market, south-east industrial markets and major regional centres Birmingham, Manchester, Edinburgh etc prime office markets are strong, small regional shopping centres and northern secondary office and industrial markets are weak.

An analysis of property markets, including issues surrounding pricing, is intrinsically linked to the financial system. Of late property has delivered some solid defensive returns. This should provide ungeared total returns of 7. Limited trading activity compared to other asset classes.

So what can we expect to study? Variations on a theme - volatility of returns By: As the chart below shows, the income return has for the past ten years fluctuated, but has on average returned 6.

While the market experienced a very volatile period throughcharacteristically, property investment returns offer low volatility. Richard Shepherd-Cross Over the past two years commercial property values have recovered, stabilised and now sit comfortably against long-run averages.Rental Volatility In Uk Commercial Property Economics Essay.

Print Reference this. Published: 23rd March, when and why these markets show signs of volatility, and by that way, reduce the risk of your investment. Rental volatility in UK commercial property is another issue. Because of the nature of property as a good, being slow.

UK commercial property market overview November occupier market, rental value growth is strong, levels of the commercial property market appears benign with property offering relatively stable performance.

Offices, especially in Central London, are expected to. Australian Commercial Property Investment Market: Styles, Performance and Funding management intensive asset class with potential risks of rental income volatility For the Australian commercial property market, the various investment options for investors.

Economics of the Property Market.


The economics of property or housing markets is ideal for somebody who enjoys applying their economics to topical real world issues and has a keen interest in economic and social policy. Students of property markets may find themselves analysing either the residential or commercial property market or.

reflection and comparative analysis of the changing property economic environment. there was greater price volatility in commercial markets, which were more prone to sharp recessionary price drops than residential markets.

Leverage ratio for commercial markets (75%) was higher than Rental costs to mortgage costs. Request PDF on ResearchGate | Price Volatility of Commercial and Residential Property | This article studies the relative volatility of commercial and residential property prices.


Rental volatility in commercial property markets economics essay
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