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Managing risk in residential portfolios

Author

Listed:
  • Rob Courtens
  • Bert Teuben
  • Maarten Broek

Abstract

Dutch investors have got a great allocation of residential real estate in their (in)direct real estate portfolio. This paper discusses an instrument for risk management in direct residential portfolios which can be used at several management levels. The instrument will give real estate asset managers benchmark information on their exposure to risk and gives them insights on how they could reduce their overall portfolio risk. Currently IPD only measures risk by historic performance for the Dutch residential portfolios and doesnít measure the risk exposure at one point in time. In the past Blundell, Fairchild and Goodchild developed a risk-web for commercial real estate in the UK with 10 risk factors. These risk factors as they are defined in the UK cannot be used for residential real estate in the Netherlands due to differences in lease agreements and part transaction scenarioís. The risk factors within the Dutch residential market are determined by a survey among Dutch real estate researchers. Also a ranking to the factors was added. The factors are compared to the factors identified for commercial real estate in the UK. In addition to the risk web for real estate investors a risk web is developed for social housing associations as well. The previous paper of Blundell et al. showed that the risk factors didnít capture a significant portion of the variance in the returns for the UK funds. This paper tries to identify for one real estate sector (residential) in a smaller geographical area (the Netherlands) if there is a larger portion of the variance in risk and volatility which could be captured.

Suggested Citation

  • Rob Courtens & Bert Teuben & Maarten Broek, 2011. "Managing risk in residential portfolios," ERES eres2011_279, European Real Estate Society (ERES).
    • Handle: RePEc:arz:wpaper:eres2011_279
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    More about this item

    JEL classification:

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

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