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The Interest Rate Spread And Real Estate Returns ---- Evidence From Hong Kong

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  • Yishuang Xu
  • Chung Yiu
  • Yiu Yim

Abstract

As the capitalization rates are tightly related to the required rates of return, there are a number of dynamics driving capital markets can help to explain the observed cap rates over time. Anyway, there are few researches discussing about why and how real estate cap rates and capital market interact. This paper employs a model to explore why the cash flow of real estate market is influenced by the changes of capital market. Furthermore, we employ data from Hong Kong real estate and capital markets to investigate how cap rates are affected by the capital market dynamics. The findings reveal a moderate relation between cap rates and term-spread of interest rate, as well as evidence of influence of the capital flowing from foreign markets to domestic market.

Suggested Citation

  • Yishuang Xu & Chung Yiu & Yiu Yim, 2010. "The Interest Rate Spread And Real Estate Returns ---- Evidence From Hong Kong," ERES eres2010_225, European Real Estate Society (ERES).
    • Handle: RePEc:arz:wpaper:eres2010_225
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    File URL: https://eres.architexturez.net/doc/oai-eres-id-eres2010-225
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    JEL classification:

    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location

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