IDEAS home Printed from https://ideas.repec.org/a/taf/jpropr/v32y2015i3p217-239.html
   My bibliography  Save this article

Estimating quality adjusted commercial property price indexes using Japanese REIT data

Author

Listed:
  • Chihiro Shimizu
  • W. Erwin Diewert
  • Kiyohiko G. Nishimura
  • Tsutomu Watanabe

Abstract

We propose a new method to estimate quality adjusted commercial property price indexes using real estate investment trust (REIT) data. Our method is based on the present value approach, but the way the denominator (i.e. the discount rate) and the numerator (i.e. cash flows from properties) are estimated differs from the traditional method. We run a hedonic regression to estimate the quality adjusted discount rate based on the share prices of REITs, which can be regarded as the stock market's valuation of the set of properties owned by the REITs. As for the numerator, we use rental prices associated with all existing contracts, as well as rental prices associated with new rental contracts, which may contain more information on future cash flows from properties. Using a data-set with prices and cash flows for about 400 commercial properties included in Japanese REITs for the period 2001-2013, we find that our price index signals turning points much earlier than an appraisal-based price index; specifically, our index peaks in the second quarter of 2007, while the appraisal-based price index exhibits a turnaround only in the third quarter of 2008. Our results suggest that the share prices of REITs provide useful information in constructing commercial property price indexes.

Suggested Citation

  • Chihiro Shimizu & W. Erwin Diewert & Kiyohiko G. Nishimura & Tsutomu Watanabe, 2015. "Estimating quality adjusted commercial property price indexes using Japanese REIT data," Journal of Property Research, Taylor & Francis Journals, vol. 32(3), pages 217-239, September.
  • Handle: RePEc:taf:jpropr:v:32:y:2015:i:3:p:217-239
    DOI: 10.1080/09599916.2015.1059875
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/09599916.2015.1059875
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Erwin Diewert & Chihiro Shimizu, 2017. "Alternative Approaches to Commercial Property Price Indexes for Tokyo," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 63(3), pages 492-519, September.
    2. Jim Clayton & David Geltner & Stanley W. Hamilton, 2001. "Smoothing in Commercial Property Valuations: Evidence from Individual Appraisals," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 29(3), pages 337-360.
    3. Neil Crosby & Colin Lizieri & Patrick McAllister, 2010. "Means, motive and opportunity? Disentangling client influence on performance measurement appraisals," Journal of Property Research, Taylor & Francis Journals, vol. 27(2), pages 181-201, April.
    4. W. Erwin Diewert & Kevin J. Fox & Chihiro Shimizu, 2016. "Commercial Property Price Indexes And The System Of National Accounts," Journal of Economic Surveys, Wiley Blackwell, vol. 30(5), pages 913-943, December.
    5. Tobin, James, 1969. "A General Equilibrium Approach to Monetary Theory," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 1(1), pages 15-29, February.
    6. Sheharyar Bokhari & David Geltner, 2012. "Estimating Real Estate Price Movements for High Frequency Tradable Indexes in a Scarce Data Environment," The Journal of Real Estate Finance and Economics, Springer, vol. 45(2), pages 522-543, August.
    7. Steven Devaney & Roberto Martinez Diaz, 2011. "Transaction based indices for the UK commercial real estate market: an exploration using IPD transaction data," Journal of Property Research, Taylor & Francis Journals, vol. 28(4), pages 269-289, June.
    8. Hayashi, Fumio & Inoue, Tohru, 1991. "The Relation between Firm Growth and Q with Multiple Capital Goods: Theory and Evidence from Panel Data on Japanese Firms," Econometrica, Econometric Society, vol. 59(3), pages 731-753, May.
    9. Hayashi, Fumio, 1982. "Tobin's Marginal q and Average q: A Neoclassical Interpretation," Econometrica, Econometric Society, vol. 50(1), pages 213-224, January.
    10. Calvo, Guillermo A., 1983. "Staggered prices in a utility-maximizing framework," Journal of Monetary Economics, Elsevier, vol. 12(3), pages 383-398, September.
    11. Marc K. Francke & Gerjan A. Vos, 2004. "The Hierarchical Trend Model for Property Valuation and Local Price Indices," The Journal of Real Estate Finance and Economics, Springer, vol. 28(2_3), pages 179-208, March.
    12. Fisher, Jeffrey D & Geltner, David M & Webb, R Brian, 1994. "Value Indices of Commercial Real Estate: A Comparison of Index Construction Methods," The Journal of Real Estate Finance and Economics, Springer, vol. 9(2), pages 137-164, September.
    13. Owen A. Lamont & Richard H. Thaler, 2003. "Anomalies: The Law of One Price in Financial Markets," Journal of Economic Perspectives, American Economic Association, vol. 17(4), pages 191-202, Fall.
    14. Diewert, Erwin, 2007. "The Paris OECD-IMF Workshop on Real Estate Price Indexes: Conclusions and Future Directions," Economics working papers diewert-07-01-03-08-12-12, Vancouver School of Economics, revised 31 Jan 2007.
    15. Joseph T.L. Ooi & Seow‐Eng Ong & Poh‐Har Neo, 2011. "The Wealth Effects of Property Acquisitions: Evidence from Japanese and Singaporean REITs," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 39(3), pages 487-505, September.
    16. Diewert, Erwin & Shimizu, Chihiro, 2013. "A Conceptual Framework for Commercial Property Price Indexes," Economics working papers erwin_diewert-2013-44, Vancouver School of Economics, revised 09 Oct 2013.
    17. Chihiro Shimizu & Kiyohiko Nishimura, 2007. "Pricing Structure in Tokyo Metropolitan Land Markets and its Structural Changes: Pre-bubble, Bubble, and Post-bubble Periods," The Journal of Real Estate Finance and Economics, Springer, vol. 35(4), pages 475-496, November.
    18. Geltner, David & Goetzmann, William, 2000. "Two Decades of Commercial Property Returns: A Repeated-Measures Regression-Based Version of the NCREIF Index," The Journal of Real Estate Finance and Economics, Springer, vol. 21(1), pages 5-21, July.
    19. Quan, Daniel C & Quigley, John M, 1991. "Price Formation and the Appraisal Function in Real Estate Markets," The Journal of Real Estate Finance and Economics, Springer, vol. 4(2), pages 127-146, June.
    Full references (including those not matched with items on IDEAS)

    More about this item

    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • G19 - Financial Economics - - General Financial Markets - - - Other

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:jpropr:v:32:y:2015:i:3:p:217-239. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Chris Longhurst). General contact details of provider: http://www.tandfonline.com/RJPR20 .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.