Transparency, Integration, and the Cost of International Real Estate Investments

Piet M. A. Eichholtz, Nils Gugler and Nils Kok

Online First™, 27 April 2010

Abstract

This paper investigates the importance of market institutions for the performance of international property investors during the 1996–2007 period. The results show that international property companies underperform local property companies in the early years of the sample period. This underperformance is driven by the political environment, the level of economic integration, and the transparency of the real estate market in target countries. The underperformance of internationals disappears in the later years of the sample period, and so does the significance of the aforementioned factors in explaining performance differences among international companies. These findings suggest that the increased transparency of the global real estate industry has leveled the playing field for foreign property investors.

Keywords  Real estate – Transparency – Political risk – Investments – International

We thank seminar participants at the 2008 REIT symposium at DePaul University, Chicago, as well as Joseph Ooij and Andy Naranjo for their helpful comments.
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