ArticlePDF Available

PROFITABILITY OF INVESTING IN RESIDENTIAL UNITS: THE CASE OF REAL ESTATE MARKET IN POLAND IN THE PERIOD FROM 1997 TO 2011

Authors:

Abstract

The aim of this paper is to estimate the profitability of investing in residential units using the example of the local real estate market in the biggest cities in Poland in the years 1997-2011. The capital gains were estimated for Cracow, Lodz, Gdansk, Poznan, Warsaw and Wroclaw. In case of total return it was possible to estimate it only for Poznan (since only for Poznan the gather information on rental fees in years 1996-2011 was available). The paper is divided into three parts. In the first part the determinants of real estate investment are analyzed. Then the house price changes in the biggest cities in Poland in years 1996-2011 are presented. The third part of the paper contains estimations of the rate of return on investment in apartments in selected cities.
Maria Trojanek1, Radoslaw Trojanek2
PROFITABILITY OF INVESTING IN RESIDENTIAL UNITS: THE CASE OF
REAL ESTATE MARKET IN POLAND IN THE PERIOD
FROM 1997 TO 2011
The aim of this paper is to estimate the profitability of investing in residential units using the
example of the local real estate market in the biggest cities in Poland in the years 19972011. The
capital gains were estimated for Cracow, Lodz, Gdansk, Poznan, Warsaw and Wroclaw. In case of
total return it was possible to estimate it only for Poznan (since only for Poznan the gather infor
mation on rental fees in years 19962011 was available). The paper is divided into three parts. In
the first part the determinants of real estate investment are analyzed. Then the house price changes
in the biggest cities in Poland in years 19962011 are presented. The third part of the paper con
tains estimations of the rate of return on investment in apartments in selected cities.
Keywords: apartment prices, rate of return, housing market.
Introduction. With the growth of market economy in Poland, some markets which
played a marginal role in the pretransition economic system have grown in impor
tance. The housing market is undoubtedly one of them. The significant role this seg
ment of the real estate market plays in economy may be attributed to the fact that real
estate is perceived as capital, which makes it possible to create added value for the
owner as well as for the local and national economy. A number of studies conducted in
various countries indicate that this market has considerable influence upon the macro
economic situation of regions and national economies. The following factors are
responsible for such a state of affairs. Firstly, the price level of apartments affects the
construction companies' decisions concerning new investment projects. Secondly,
apartment prices may influence the household demand. Higher prices mean that prop
erty owners grow richer, which translates into the growth of consumption. Thirdly,
changes in the real estate market may affect the level of inflation, for example, the
more expensive apartments become, the costlier it is to maintain them. Assuming that
price fluctuations in the real estate market affect both private consumption and invest
ment, changes in the aggregate demand may contribute to the increase in the prices of
other goods and services. Price changes also seem to have an effect on consumers'
expectations. The abovementioned interactions and implications depend both on the
price level itself and its fluctuations in time.
Each market, same as the whole economy, is subject to business cycles. This rule
can be applied also to the real estate market, too. The course of economic fluctua
tions on real estate market can vary depending on specific segments of this market.
These fluctuations are often of national range conditioned by changing economic sit
uation in the country. Taking into account a specific character of property – immo
bility – economic changes on real estate market are, first of all, of regional and local
range. It means that even in case of the overall economic growth, one region or town
can go through stagnation and vice versa. Local real estate market can develop even
if the whole economy decreases. All these factors influence the profitability of invest
ing in residential units.
ACTUAL PROBLEMS OF ECONOMICS
ACTUAL PROBLEMS OF ECONOMICS 73
(c) Maria Trojanek, Radoslaw Trojanek
(c) Maria Trojanek, Radoslaw Trojanek, 2012
, 2012
1Prof., Poznan University of Economics, Poland
2Ph.D., Poznan University of Economics, Poland
The determinants of real estate investment
The main determinants of investment, regardless of the area of investment,
include profitability and risk (Nawrot, 2008). What also seems to be important is
the ease of exit from such an investment, i.e. liquidity and marketability. Other
important factors which are worth considering include: capitalintensiveness, uni
formity and perfection of markets, and costs of market operations.
Profitability
Most investment decisions are stimulated by the pursuit of profit. There is a
number of measures to estimate the profitability of an investment. One of them is
the return rate which is the relation between the annual rate of return on invest
ment and its cost (Mayo, 2008).
The literature provides a number of definitions of a return rate, which differ
in construction and in content. Therefore, when comparing rates of return on dif
ferent investments, we must pay particular attention to the calculation methods
applied. An investor's profit may take the form of:
income (dividends, interest),
– capital gains.
In the real estate market, such profit takes the form of a ground rent. While
the property owner charges a lease fee, he or she also has to bear the costs of its
maintenance and of using it as a source of income. These costs include: taxes and
charges, renovation costs, management costs, etc. When analyzing profit in the
real estate market, we may notice that by analogically with the capital market it is
basically estimated beforehand, and in some cases it is relatively stable and easily
assessable.
The basic method of investing in real estate is a house or an apartment own
ership. It generally comes down to the fact that a person rents the necessary living
space and invests at the same time. Renting an apartment, however, only refers to
using its space. Moreover, decisions concerning owning an apartment are not
determined by financial factors only. It is the psychological benefit of owning an
apartmentwhich can be called one's home that plays an enormous role here.
It is widely believed that purchasing a house is the best investment. It can be
regarded as a rent for "letting" it to oneself. On the other hand, the increase of the
value of a house is a kind of protection against inflation.
Risk
Risk is an inseparable part of each type of investment, irrespective of the kind
of assets one invests in. Risk refers to the situation in which at least one of its com
ponents remains unknown, but the probability of its occurrence may be identified
(Dobbins, Frackowiak, Witt, 1992). It should be interpreted as the degree of
uncertainty as to the expected profit from an investment.
From the economic perspective, risk is typically defined as the probability of
losses due to lost income, unexpected losses and other unfavorable occurrences.
Generally speaking, investment risk may be divided into:
systematic risk (external, market),
specific risk (internal).
In case of the real estate market, special attention must be paid to the market
risk, the liquidity risk, the risk of failing to comply with the terms of contract, and,
ACTUAL PROBLEMS OF ECONOMICS
ACTUAL PROBLEMS OF ECONOMICS
74
ACTUAL PROBLEMS OF ECONOMICS Vol. 2, #7, 2012
ACTUAL PROBLEMS OF ECONOMICS Vol. 2, #7, 2012
in some specific situation, the exchange and financial risk. It is the liquidity risk
that has the biggest influence on the general level of risk in the area of real estate.
One of the problems related to with investing in property is the difficulty in exit
ing. Some specialists dealing with the real estate market indicate additional
sources of risk. We may distinguish the following types:
– management risk – connected with the need for the permanent, compe
tent servicing of a property,
tax risk – connected with changes in the taxation systems in the countries
in which the property is located. They refer to taxes on capital gains and property
tax, as well as to income tax,
– environmental risk – connected with the fact that the value of a property
may be subject to changes in its environment,
legislative risk – resulting from changes in the legal environment.
It is commonly believed that due to its physical attributes (permanence in
time and space) and the possibility of being insured against unforeseen emergen
cies, real estate investments are among the safest ones.
Liquidity and marketability
Apart from risk and amount of profit, investments also vary in liquidity or
marketability, or in both these attributes at the same time. Marketability refers to
the ease with which assets may be bought and sold. Liquidity is defined as the ease
with which assets may be exchanged into cash without suffering a significant loss.
When choosing assets to serve specific investment purposes, it is extremely
important to know the difference between liquidity and marketability. Liquidity
guarantees the security of capital and refers to assets which may be easily turned
into cash with little risk of losing the invested funds. For many investors, it is the
security and easy access to funds rather than the marketability of assets that is of
the key importance when making investment decisions. Treasury bonds are a good
example of an instrument characterized by both liquidity and marketability.
Real estate investment is characterized by low liquidity and marketability.
This is because the sale of a property, depending on its type, requires time, and
sometimes lowering of the asking price. Moreover, costs related to transferring
rights to the property are high. They include such charges as a stamp duty, a notar
ial fee, the agent's fee etc.
Some researchers (Benke, Fowler 1995) consider apartments to be the most
liquid investments in the area of real estate. They indicate that there is a large base
of potential buyers, which makes it possible to conduct transactions in a short
time. Luxury apartments, in turn, are thought to be difficult to sell due to the spe
cific character of this housing segment. They are usually sold to investors rather
than to people seeking accommodation. Land is perceived to be the least liquid –
it is believed to be subject to speculation and each buyer is thought to be definite.
It is often said that because of their higher liquidity investments in shares or
bonds are more attractive than real estate investments. There are people, however,
who believe lower liquidity is an advantage as such assets cannot be quickly sold.
Thus, an investor cannot sell a property to solve his or her sudden financial prob
lems, because it is not easy to do. Some say this is a big plus as it makes people
rethink the problem and try to find other solutions (Mclean, Eldrer, 2001).
ACTUAL PROBLEMS OF ECONOMICS
ACTUAL PROBLEMS OF ECONOMICS 75
ACTUAL PROBLEMS OF ECONOMICS Vol. 2, #7, 2012
ACTUAL PROBLEMS OF ECONOMICS Vol. 2, #7, 2012
The diversity of the market
The diversity of the market refers to its internal diversity in terms of spatial range,
the character of acquired rights, the variety of potential market investment objects, etc.
The real estate market is highly diverse, which means that, depending on the
adopted criteria, various market segments are distinguished.
The reason for such distinction of markets is "the stratification of demand",
which in turn is associated with the pursuit of a specific goal, e.g. people use and seek
property to satisfy their accommodation needs or gain profit. The characteristic fea
ture of the real estate market is the fact that its individual components overlap each
other and their functions interpenetrate – e.g. the housing function may be turned
into the office one and vice versa.
The imperfection of the market
The category of a perfect market is strictly connected with the conditions of per
fect competition. It is a theoretical category, which reflects the ideal market, where:
there is a large number of buyers and sellers, thus no single transaction
affects the circumstances in which transactions are completed,
there is perfect information about market prices, so the market is transparent,
– goods are homogeneous,
participants of a transaction make their decisions exclusively on the price
basis, they are not bound by any limitations.
When compared to other markets, the real estate market seems to be inefficient and
difficult to analyze. The stock market, in which transactions are carried out by qualified
brokers, may serve as a good example of a perfect market. Transactions are transparent,
their participants have equal access to information, personal preferences and informal
arrangements between buyers and sellers are eliminated. Standardized goods or documents
are the subject of exchange, which reduces the randomness of prices caused by variable
tastes, fashion or effective advertising. Transactions are made at a single place and time,
which eliminates any accidental disturbances resulting from the distance between them.
Capital intensiveness
Each investment involves the need for accumulating specific funds. The amount
of expenditure varies depending on the type and scale of investment, thus an investor
should carefully consider each decision concerning capital deployment beforehand.
High capital intensiveness of the real estate market is attributed to the features of a real
property as the subject of investment. This fact is first of all connected with the physi
cal indivisibility of a property. High prices of buildings, especially commercial and
industrial ones, make them hardly available to individual buyers unlike institutions or
organisations. Although it is theoretically possible to purchase a small plot of land or a
part of a residential unit, but it is not usually practiced due to functional and econom
ic reasons. This situation has the following implications:
the need for borrowing,
– long payback period,
relatively long economic viability,
the need for expenditure on depreciation (Ibidem, p. 121.)
It should also be emphasized that property ownership itself means that we have
to bear a lot of costs, such as: property tax, maintenance costs to keep the property
economically viable, management and insurance costs.
ACTUAL PROBLEMS OF ECONOMICS
ACTUAL PROBLEMS OF ECONOMICS
76
ACTUAL PROBLEMS OF ECONOMICS Vol. 2, #7, 2012
ACTUAL PROBLEMS OF ECONOMICS Vol. 2, #7, 2012
Costs of market operations
Active investment requires bearing specific costs. When estimating rates of
return, we need to take into account the necessity of additional expenditures, since
the profitability of planned operations is determined not only by gross income gen
erated by investment, but also by the overall turnover adjustment in a given market
and by tax issues.
Operational costs in the real estate market are high. Whether we purchase or buy
property, we need to pay fees and taxes stipulated by law. The purchase of property
must be conducted in the form of a notarial deed, which requires paying a notarial fee.
The amount of this fee depends on the property value and the type of acquired rights.
The seller is also obliged to pay income tax, which could be a serious burden.
Incomes from rent or lease are also subject to income tax.
If we are property owners, we become subject to taxation. Polish real estate taxa
tion system is composed of three types of taxes: property tax, agricultural tax and for
est tax. Therefore, there are plans to introduce a tax based on the socalled cadastral
value. It is not a new solution as in most countries it has been in use for a long time.
There is no doubt that investing in real estate entails a lot of costs, which makes
this kind of investment less profitable. Governments of many countries are encourag
ing their citizens to invest in housing property by introducing a number of tax reliefs.
Data sources and research methodology
This paper determines the scope of the subject, which includes price and rental fee
changes in the secondary housing market, relating both to full and limited ownership
rights to private accommodation. This research refers only to dwellings located in multi
family buildings. Such choice was determined by the two factors. Firstly, the majority of
dwellings are located in multifamily residentials (apartment blocks – up to 90% in big
Polish cities). Secondly, houses are characterized by great differentiation regarding both
quantitative and qualitative features, which requires the database to include the appro
priate information about each property in order to construct house price indices. On the
other hand, Polish secondary housing market is greater than the primary one (approxi
mately up to three times) taking into consideration the number of transactions.
In order to estimate the rates of return in the real estate market, the authors col
lected the information about the prices for apartments in the biggest cities in Poland
(Cracow, Gdansk, Lodz, Poznan, Warsaw, Wroclaw) in the years 19962011. The ask
ing rental fees for residential floor area over 19962011 were gathered only for Poznan
city. The use of asking prices is determined by the fact that in Polish conditions, the
access to information about transaction prices is particularly limited1.
The data regarding the apartment prices covered over 1 500 000 offers of
apartments for sale (in six biggest cities in Poland), while the data concerning the
rental fees included over 70,000 items (only Poznan) over the period 19962011.
ACTUAL PROBLEMS OF ECONOMICS
ACTUAL PROBLEMS OF ECONOMICS 77
ACTUAL PROBLEMS OF ECONOMICS Vol. 2, #7, 2012
ACTUAL PROBLEMS OF ECONOMICS Vol. 2, #7, 2012
1For a few years experts have been developing a system of recording prices and value – at present, such data are available
in most big cities. However, they only concern property (full ownership), while there is no information about apartments
with a limited right of ownership in multifamily residentials (such information is only available in housing cooperatives
– in big cities there are several dozen of such institutions) . There are different ways of providing these data – in some
cities, e.g. in Wroclaw, they may be accessed online; in others, e.g. in Poznan, they are provided in the form of pdf print
outs (overall information about transactions); whereas in Warsaw it is possible to browse and rewrite data only from the
cards with the most important information included in notarial deeds. Moreover, the access to such data is paid and they
are used mainly by property valuers (in Poland, there are over 5,000 certified property valuers).
Empty and recurring records were removed as well as those in which a specific
offer was not fully described. The recurrence of data was the result of announcing
one offer by a few estate agents, thus they were repeatedly placed in a database.
The next stage of the analysis involved checking the reliability of data obtained.
The aim was to eliminate those offers which were, for no clearly specified reasons,
far from the average. Moreover, it was assumed that the analysis will cover apart
ments with the floor space of up to 150 m2and having no more than five rooms.
Both fully owned apartments and the ones with a limited right of ownership were
examined. As a result of such selection the size of the database was reduced to
about 900 000 apartments for sale (170 000 offers in Cracow, 110 000 offers in
Lodz, 130 000 offers in Gdansk, 120 000 offers in Poznan, 250 000 offers in
Warsaw and 115 000 offers in Wroclaw) and 50,000 offers of apartments for rent
(only Poznan). The number of offers gathered meets the requirements of the rep
resentativeness of a sample.
The authors of the paper established the total, capitalbased and incomebased
rates of return. The total rate of return is a measure of potential financial gain to be
obtained from a given asset expressed as a percentage. In the case under study, the
total rate of return is the sum of the capitalbased and incomebased rate of return,
which may be represented by the following formula (1):
TRR = IRR + CRR; (1)
where:
TRR – total rate of return,
IRR – incomebased rate of return,
CRR – capitalbased rate of return.
In the modern market economy, investments are often aimed at capital gains,
defined as the growth in the value of an asset. The method of estimating the capital
based gross rate of return (without taking into consideration the costs of market oper
ations) consists in the specification of a percentage change in the value of an asset,
which may be represented by the following formula (2):
CRR = ( P1– P0)/ P0; (2)
where:
P1– average price of 1m2 of an apartment in period t,
P0– average price of 1m2 of an apartment in period t1.
The obtained rates of return do not allow for the costs related to the purchase
and sale of apartments.
Income from rent is another source of gains from investing in residential prop
erty. These gains are measured by the incomebased rate of return. It is expressed
by the following formula (3):
IRR = (I)/ P0; (3)
where:
P0– average price of 1m2of an apartment in period t,
I – average annual rent for 1m2of an apartment in period t.
ACTUAL PROBLEMS OF ECONOMICS
ACTUAL PROBLEMS OF ECONOMICS
78
ACTUAL PROBLEMS OF ECONOMICS Vol. 2, #7, 2012
ACTUAL PROBLEMS OF ECONOMICS Vol. 2, #7, 2012
In order to calculate the level of the incomebased rate of return, the average
rental fees for 1m2of the usable floor space of these residential units were established.
The incomebased rate of return on the investment in residential property was estab
lished given the following assumptions:
the apartment has been rented out for the period of one year,
the rental fee has remained at the level established at the beginning of a given
period for the whole year,
the tenant covers the maintenance costs (water, heating etc.).
All of calculations in this paper where made in real terms (from all variables the
inflation was excluded).
The very first step in the process of determination of the return rates was to make
real (for the first quarter of 1996) flat prices and rental fees in the years 19962011.
Then the seasonal and irregular fluctuations were eliminated using X12 ARIMA.
Dwelling price changes in selected cities in Poland over the period 19962011
Methods of the designing of real estate price indices may be divided, using the
criterion of allowing for changes in the quantitative and qualitative attributes of prop
erty, into two groups: simple methods (those which do not take account on changes)
and the complex ones (those which do allow for such changes, at least partly). Simple
methods include methods based on the average and the ones based on the median.
Complex methods encompass: the hedonic regression method, the resale method,
the weighted average method and the hybrid one.
Source: own research
Graph 1. Real dwelling price indices in the selected cities in Poland for the
period from 1996 to 2001
In this paper the dwelling prices indices per square metre were constructed
with a median method. The choice of this method was determined by the data
gathered – in most cases in Polish magazines there were no data on specific fea
ACTUAL PROBLEMS OF ECONOMICS
ACTUAL PROBLEMS OF ECONOMICS 79
ACTUAL PROBLEMS OF ECONOMICS Vol. 2, #7, 2012
ACTUAL PROBLEMS OF ECONOMICS Vol. 2, #7, 2012
ACTUAL PROBLEMS OF ECONOMICS
ACTUAL PROBLEMS OF ECONOMICS
80
ACTUAL PROBLEMS OF ECONOMICS Vol. 2, #7, 2012
ACTUAL PROBLEMS OF ECONOMICS Vol. 2, #7, 2012
tures of offers from 1996 to 2004 (such as construction material, standards, type of
ownership, time of construction). Because of this fact it was impossible to use one
of the complex method to construct the dwelling price indices. Graph 1 presents
the real dwelling prices indices in the selected cities in Poland or the period from
1996 to 2001.
The analysis of graph 1 shows that the real dwelling price indices in case of
Cracow increased by 206%, Gdansk – by 140%, Lodz – by 120%, Poznan – by
138%, Wroclaw – by 168% during the years 19962011 (in case of nominal terms the
increase figures were much higher). Particularly, rapid growth took place in 2006,
which resulted from many factors. Firstly, the market was informed about the possi
bility of increasing V.A.T. (value added tax) by 22%. Thus, only those flats that were
built just at that moment were burdened with 7% V.A.T. Secondly, the other impor
tant information was that 2007 was the last year to use the tax relief. Taking into con
sideration the above mentioned facts it seems that rapid growth of demand met fixed
supply and resulted in huge flat price growth in the year of 2006. Thirdly, there was
a big mortgage affordability at that time in Poland. Fourthly, Polish economy was in
good condition. Moreover, there was speculative capital doing business on the mar
ket and behavior of many buyers was irrational.
Rates of return in the residential market in the selected cities in Poland in the peri
od from 1997 to 2011
The capital gains were estimated for Cracow, Lodz, Gdansk, Poznan, Warsaw
and Wroclaw. In case of total return it was possible to estimate it only for Poznan
(since for Poznan the information on rental fees in years 19962011 was available). In
Graph 2 real capitalbased rates of return on the investment in residential units in 6
biggest cities in Poland in period from 1997 to 2011 are presented.
Source: own research
Graph 2. Real capitalbased rates of return on the investment in residential
units in 6 biggest cities in Poland in the period from 1997 to 2011
The highest real capitalbased rates of return were recorded in 2007. They
ranged from 60% (Cracow) to 100% (Lodz). The biggest real capital losses from
investments in residential units in the selected cities in Poland were recorded in
years of 20002002 and 20082011 respectively. The method used in this research2
to estimate the capital gains on dwelling investment (it shows percentage changes
year to year) may show cyclical behavior of the dwelling prices. It is worth notic
ing that fluctuations of the dwelling prices over 19972011 had a very similar
course but were not identical. These differences show the local character of the
residential markets. In case of Poland simple regression equation implies that over
60% of dwellings price fluctuations on the local housing markets may be explained
by a business cycle. It demonstrates the persistent forces that link residential local
market to a business cycle, plus mechanisms inside the residential market, that
make the dwelling price cycle more than a simple reflection of that in the econo
my (Trojanek, 2007, 2009, 2010). In the next section the residential market in
Poznan was the subject of further analysis. In Graph 3 real incomebased rates of
return on the investment in residential units in Poznan in the period from 1997 to
2011 are presented.
Source: own research
Graph 3. Incomebased rates of return on the investment in residential units
in Poznan
The incomebased rate of return on the investment in residential units in Poznan
over the period 19972011 ranged from 5% to 14%. Since 1997 we have been observ
ing a downward trend in the obtained rates of return. The average real rate of return
ACTUAL PROBLEMS OF ECONOMICS
ACTUAL PROBLEMS OF ECONOMICS 81
ACTUAL PROBLEMS OF ECONOMICS Vol. 2, #7, 2012
ACTUAL PROBLEMS OF ECONOMICS Vol. 2, #7, 2012
2Basic methods of isolation cyclical component in time series are as follows: cycle of levels, cycle of deviations from trend,
cycle of growth, and cycle of deviations of growth rate from trend (Kasperowicz, 2010, Gazda, 2010).
for all types of apartments in 19972011 was about 10%. In Graph 4 real total rates of
return on the investment in residential units in Poznan in the period from 1997 to
2011 are presented.
Source: own research
Graph 4. Total real rates of return on the investment in residential units in Poznan
The analysis of the above graph shows that the investment in residential units
in Poznan in the years 19972011 showed positive rates of return, except for 2001,
2008, 2009 and 2011. It must also be pointed out that the level of the total rate of
return is mainly determined by the capitalbased rate of return. In the period
under study, the incomebased rate of return takes positive values in the range
between 4.5% to 14%. 2007 was the best year for investing in residential units in
Poznan in the last fifteen years.
Conclusion
The aim of this paper is to estimate the profitability of investing in residential
units using the example of the local real estate market in the biggest cities in Poland
in the years of 19972011. The capital gains were estimated for Cracow, Lodz,
Gdansk, Poznan, Warsaw and Wroclaw. In case of total return it was possible to esti
mate it only for Poznan (since only for Poznan the information on rental fees was
available). Fluctuations of the dwelling prices over the period from 1997 to 2011 had
a very similar course but were not identical. These differences show the local char
acter of the residential markets. The biggest real capital losses from investments in
residential units in the selected cities in Poland were recorded in 20002002 and in
20082011 respectively. The highest real capitalbased rates of return were record
ed in 2007. The incomebased rate of return on the investment in residential units
in Poznan over 19972011 ranged from 5% to 14%. Since 1997 we have been
observing a downward trend in the obtained rates of return. The average real rate of
return for all types of apartments in 19972011 was about 10%.
ACTUAL PROBLEMS OF ECONOMICS
ACTUAL PROBLEMS OF ECONOMICS
82
ACTUAL PROBLEMS OF ECONOMICS Vol. 2, #7, 2012
ACTUAL PROBLEMS OF ECONOMICS Vol. 2, #7, 2012
References:
Benke W., Fowler J., All about Real Estate Investing, Probus Publishing, Cambridge 1995.
Dobbins R., Frackowiak W., Witt S.F., Praktyczne zarzadzanie kapitalami firmy, Paanpol, Poznan 1992.
Gazda J., Real Business Cycle Theory – Methodology and Tools, Economics & Sociology Vol.3 No. 1.
Kasperowicz R.,Identification of Industrial Cycle Leading Indicators Using Causality Test, EQUI
LIBRIUM Pismo poswiecone naukom ekonomicznym 2010 nr 2 (5)
Mayo H.B., Investments: An Introduction, Thomson SouthWestern, Mason, OH 2008,
McLean A., Eldred G., Investing in Real Estate, John Wiley and Sons, New York 2001.
Nawrot L., A study of barriers to entrepreneurship in selected Kashubian commumties, in
Entrepreneurship and quality in tourism in light of Polish and international research / sc. ed. G.
Golembski. – Poznan : Wydaw. AE, 2008
Trojanek, R., 2007, Indeksy cen nieruchomosci mieszkaniowych – aspekty teoretyczne i prakty
czne, Problemy Rozwoju Miast, nr 4.
Trojanek, R., 2009, Porownanie metod prostych oraz sredniej wazonej do konstruowania indeksow
cen mieszkan, Studia i Materialy Towarzystwa Naukowego Nieruchomosci, nr 17/2.
Trojanek R., Dwellings' price fluctuations and the business cycle, Economics & Sociology, 2010;
vol. 3, No 2
ACTUAL PROBLEMS OF ECONOMICS
ACTUAL PROBLEMS OF ECONOMICS 83
ACTUAL PROBLEMS OF ECONOMICS Vol. 2, #7, 2012
ACTUAL PROBLEMS OF ECONOMICS Vol. 2, #7, 2012
... We observed that within the period under study (2010-2015), time had a significant impact on transaction prices. It is worth mentioning that housing prices in the biggest cities in Poland increased by about 100% between 2006 and 2007 [68,69]. At the end of 2007, the subsequent decreasing phase in the property price cycle began, resulting from this abnormal price increase and the beginning of financial crisis [70]. ...
Article
Full-text available
In the paper, we analyzed the impact of aircraft noise on housing prices. We used a dataset containing geo-coded transactions for 1328 apartments and 438 single-family houses in the years 2010 to 2015 in Poznan. In this research, the hedonic method was used in OLS (ordinary least squares), WLS (weighted least squares), SAR (spatial autoregressive model) and SEM (spatial error model) models. We found strong evidence that aircraft noise is negatively linked with housing prices, which is in line with previous studies in other parts of the world. In our research, we managed to distinguish the influence of aircraft noise on different types of housing. The noise depreciation index value we found in our study was 0.87% in the case of single-family houses, and 0.57% regarding apartments. One of the reasons for the difference in the level of impact of aircraft noise may be the fact that the buyers of apartments may be less sensitive to aircraft noise than the buyers of single-family houses.
... The most vivid effects can be observed in commercial property markets where interdependence causes more intense investment activity in the neighbourhood (for instance, IKEA, "Old Brewery: in Poznan, "Manufacture" in Lodz) [1], [2]. It is not only connected with investments in the commercial property market, but also in residential and public properties [7], [8]. Studies of the neighbourhood nature and quality consider presence of organized urban greenery and recreational areas (municipal parks or areas accompanying residential estate space) [9], [10]. ...
Article
Full-text available
The variability of the urban environment, where the symptoms are observed in terms of spatial, aesthetic, architectural, urban and socio-economic development, seems to be relevant to the functioning of the local real estate market. Housing issue is the vital component of sustainable socioeconomic city development. The perception of the property attractiveness is determined by price-setting attributes such as: building standard, area, utilities, zoning and also location and neighbourhood. The attractiveness of the residential property is manifested in its market value. As part of the follow-urban transformation, it seems to be important to reconstruct the impact of the neighbourhood changes on the housing market. The authors attempt to explain the ensuing problem on the example of one of the streets in a Polish city – Kalisz, which over the years has gained a new streetscape and market image. They endeavour to simulate changes in the market value of selected properties located on the street, in order to map the influence of changes on the value.
... The most vivid effects can be observed in commercial property markets where interdependence causes more intense investment activity in the neighbourhood (for instance, IKEA, "Old Brewery: in Poznan, "Manufacture" in Lodz) [1], [2]. It is not only connected with investments in the commercial property market, but also in residential and public properties [7], [8]. Studies of the neighbourhood nature and quality consider presence of organized urban greenery and recreational areas (municipal parks or areas accompanying residential estate space) [9], [10]. ...
Chapter
The variability of the urban environment, where the symptoms are observed in terms of spatial, aesthetic, architectural, urban and socio-economic development, seems to be relevant to the functioning of the local real estate market. Housing issue is the vital component of sustainable socioeconomic city development. The perception of the property attractiveness is determined by price-setting attributes such as: building standard, area, utilities, zoning and also location and neighbourhood. The attractiveness of the residential property is manifested in its market value. As a part of the follow-urban transformation, it seems to be important to reconstruct the impact of the neighbourhood changes on the housing market. The authors attempt to explain the ensuing problem on the example of one of the streets in a Polish city – Kalisz, which over the years has gained a new face and market image and simulate changes in the market value of selected properties located on the street, in order to map the influence of changes on the value.
Article
Full-text available
Purpose: The paper investigates senior citizens' housing preferences and needs in medium-sized Polish cities, aiming to inform sustainable housing development strategies that cater to an ageing population. Methodology: Utilizing a questionnaire survey, the study engages a representative group of seniors and pre-seniors within the Wielkopolskie Voivodeship to gather data on their housing conditions, preferences, and expectations. Results: Findings reveal a significant demand for housing adapted to seniors’ needs, with preferences leaning towards dwellings without architectural barriers and including essential services. The research highlights the discrepancy between current living conditions and the ideal housing situation for seniors. Theoretical Contribution: This paper contributes to the discourse on sustainable urban development by emphasizing the importance of integrating senior citizens’ housing preferences into planning and policy-making processes. Practical Implications: The study offers valuable insights for real estate developers, urban planners, and policymakers, suggesting the need for a diversified housing market that includes options tailored to the elderly, potentially influencing future housing policies and market offerings.
Article
Full-text available
Housing practitioners and policy experts are advocating for an expansion in rental housing supply in contemporary cities around the world. The objective is to convince institutional investors to include rental housing investment in their investment portfolio to contribute to boosting housing supply. Unfortunately, the rental sector is characterized by numerous uncertainties and challenges, making it unattractive to institutional investors. With the growing attention to institutional investors in various housing market contexts, an understanding of the market risks (also known as barriers), is useful to inform future research and policymaking. Using a systematic literature review methodology, this paper synthesizes the extant literature on the market risks inhibiting institutional investment in rental housing. Findings reveal the following barriers: low profitability, non-progressive rent control policies, unclear target group for rented projects, poor landlord-tenant relations, inadequate property management and unreliable property market information. Among all the barriers identified, low profitability and inadequate property management had great influence on their investment decision. Firstly, institutional investors perceive rental housing investment as less profitable and unattractive in terms of project performance. Secondly, the lack of supporting structures for the property management sector contributes to derailing rental yields. The review also finds that the target group for rental projects are often vague especially for projects under government assistance. The rental sectors in many countries are confronted with numerous problems, some of which greatly inhibit institutional investors from investing in the rental asset. This paper concludes that, although the idea of expanding rental housing supply seems laudable, ignoring these problems may be detrimental to housing markets in the long run. Rental markets in many countries are volatile, and thus not ready to receive institutional investors fully into the sector. An expanded rental sector could be advanced if policy makers take the appropriate steps to resolve the identified challenges. Adequate structural preparations must also be made for large scale rental housing supply.
Article
Full-text available
The dream of every young secondary school students has being to further their education career into the tertiary institution to become the person they have being dreaming or hoping for. As a result of this, every nation of the world have being experiencing a proliferation in the number of student that are being enrolled into the tertiary institution on yearly basis. Sequel to the increase in the number of enrolment per year and couple with the deficit in the number of students un-accommodated into the on-campus hostel per year has being a major issue in satisfying student housing accommodation, hence the need for private investors to invest in private student hostel in tertiary institutions. This research examined private student hostel investment around Federal Polytechnic, Ado-Ekiti with a view to ascertaining the risk involved and the level of profitability of private student Hostel Investment. The target population of the study was the owners of private student hostels around the Federal Polytechnic Ado-Ekiti. The sampling frame of the private hostel investment around the Federal Polytechnic was derived by means of a census covering Demola Junction, Aba and Afe Babalola axis. The study examined five different hostel type which include; a single room, self-contained, one bedroom flat, two bedroom flat and three bedroom flat. The research revealed that, though all the hostel types seems to be profitable to invest upon, but an investment in self-contained hostel room is more profitable to invest in because of its low level of risk and also because of its profitability index. The study therefore recommend among others that investors should endeavour to invest more on private student hostel with more concentration on self-contained hostel investment which is less risky and profitable type of investment. Therefore, the importance of this study is to advice investors on the type of hostel type to invest in the study area.
Article
Full-text available
El desarrollo del sector inmobiliario ha acaparado la atención de investigadores e inversionistas alrededor del mundo durante décadas, lo que propicia la aparición de una gran cantidad de artículos relacionados con el tema; sin embargo, en Colombia es difícil encontrar este tipo de trabajos, pues como consecuencia de los problemas de seguridad existentes, la información del sector no es conocible con facilidad. El principal hallazgo del estudio radica en que las tasas de capitalización de la vivienda son más altas en aquella ubicada en los estratos más bajos e inferiores en las localizadas en los estratos más altos. La alta demanda de viviendas en alquiler en los estratos bajos y la poca oferta generan alta rentabilidad, contrario a lo que ocurre en los estratos altos.
Article
Full-text available
Research background: There are several methods to construct a price index for infrequently traded real estate assets (mainly residential, but also office and land). The main concern to construct a valid and unbiased price index is to address the problem of heterogeneity of real estate or put differently to control for both observable and unobservable quality attributes. The one most frequently used is probably the hedonic regression methodology (classic, but recently also spatial and quantile regression). An alternative approach to control for unobservable differences in assets’ quality is provided by repeat sales methodology, where price changes are tracked based on differences in prices of given asset sold twice (or multiple times) within the study period. The latter approach is applied in renown S&P CoreLogic Case-Shiller house price indices. Purpose of the article: The goal of the paper is to assess the applicability of repeat sales methodology for a major housing market in Poland. Previous studies used the hedonic methodology or mix adjustment techniques, and applied for major metropolitan areas. The most widely known example is the set of quarterly house price indices constructed by NBP — especially for the primary and secondary market. The repeat sales methodology has not been adopted with significant success to date — mainly because of concern regarding relative infrequency of transactions on the housing market in most metropolitan areas (thus a potentially small sample of repeated sales). Methods: The study uses data on repeat sales of residential transactions in Krakow from 2003 to 2015. We apply different specifications of repeat sales index construction and compare respective values to the hedonic price index for Krakow estimated by NBP. Findings & Value added: Findings suggest that repeat sales house sales indices can be used to track price dynamics for major metropolitan areas in Poland. The study suggests problems that need to be addressed in order to get unbiased results — mainly data collection mechanism and estimation procedure.
Article
Full-text available
Studies investigating the relation between risk and return occupy an important place in the discussion about the effectiveness of investing in real estate. A review of the available studies shows that real estate investments are less profitable than stocks, but in terms of risk and return, are usually the best option. This worldwide regularity may not necessarily be presented in Poland, as the Polish market is not fully fledged yet. The analysis presented in this article was performed with a view to reducing a research gap resulting from the lack of comprehensive Polish studies in this field. In the article, data spanning the years from 2006 to 2016 are examined by means of descriptive statistics, measures of risk, and the analysis of variance (ANOVA) to determine which of the following investment vehicles - bonds, real estate or stocks - offer the best risk-return ratio. The article has two parts. The analytical part is a review of studies on risk measurement methods and of earlier studies investigating risk and return by a class of assets (particularly real estate). In the empirical part, assets are compared with the use of statistical methods. The results of the risk-return analysis point to the money market as the best option for investors. Stocks and real estate ranked second and third, respectively.
Article
Full-text available
The main aim of the paper is to identify the influence of business cycle in Poland on dwelling's price fluctuations on the secondary housing market in the years 1996- II q. 2009 in Poznań. The subject scope results from the aim of the paper and includes price fluctuations on the secondary housing market, involving both property rights and cooperative property rights for private accommodation.
Article
Full-text available
The Real Business Cycle (RBC) research program has grown spectacularly over the last two decades, as its concepts and methods have diffused into mainstream macroeconomics. In its primary version it bases on growth model with neoclassical production function which is subject to a stochastic supply shocks. Simultaneously employing in analysis rational agent which decides about labor input and deserved consumption allows to develop model following cyclical fluctuations observed in the economy. In order to do so multistage calibration-simulation procedure is used. The main aim of the article is to present methodological innovations introduced by RBC proponents such as: Hodrick Prescott filter, and multistage calibrationsimulation procedure.
Article
Full-text available
The biggest business activity fluctuation analysts’ attention is focused on leading indicators. It is due to their utility in forecasting resulting form their properties. Leading indicators are aggregates describing a part of economy (e.g. sector, branch) and, therefore, they also partly anticipate new behaviours of the whole of the economy. The first aim of the paper is to identify industrial business cycle leading indicators in Poland. The second aim is to estimate a leading index of cyclical fluctuations of industry. When identifying the fluctuations, first one has to purify the time-series of incidental and seasonal fluctuations. Then, the time-series underwent the adjustment procedure Census X11 and Hodrick-Prescott’s filter. This is the way in which the cyclical fluctuations of the time-series were obtained. Seeking variables determining leading indicators of the reference variable was conducted on the basis of Granger causality analysis. Series selected in that way were used to create a forecasting econometric model (leading index).
All about Real Estate Investing
  • W Benke
  • J Fowler
Benke W., Fowler J., All about Real Estate Investing, Probus Publishing, Cambridge 1995.
Investments: An Introduction, Thomson SouthhWestern Investing in Real Estate A study of barriers to entrepreneurship in selected Kashubian commumties, in Entrepreneurship and quality in tourism in light of Polish and international research / sc
  • R Kasperowicz
  • H B G Mayo
  • Golembski
  • Poznan
Kasperowicz R.,Identification of Industrial Cycle Leading Indicators Using Causality Test, EQUII LIBRIUM Pismo poswiecone naukom ekonomicznym 2010 nr 2 (5) Mayo H.B., Investments: An Introduction, Thomson SouthhWestern, Mason, OH 2008, McLean A., Eldred G., Investing in Real Estate, John Wiley and Sons, New York 2001. Nawrot L., A study of barriers to entrepreneurship in selected Kashubian commumties, in Entrepreneurship and quality in tourism in light of Polish and international research / sc. ed. G. Golembski. – Poznan :
Porownanie metod prostych oraz sredniej wazonej do konstruowania indeksow cen mieszkan, Studia i Materialy Towarzystwa Naukowego Nieruchomosci, nr 17/2. Trojanek R., Dwellings' price fluctuations and the business cycle
  • R Trojanek
Trojanek, R., 2009, Porownanie metod prostych oraz sredniej wazonej do konstruowania indeksow cen mieszkan, Studia i Materialy Towarzystwa Naukowego Nieruchomosci, nr 17/2. Trojanek R., Dwellings' price fluctuations and the business cycle, Economics & Sociology, 2010;
A study of barriers to entrepreneurship in selected Kashubian commumties, in Entrepreneurship and quality in tourism in light of Polish and international research / sc
  • L Nawrot
Nawrot L., A study of barriers to entrepreneurship in selected Kashubian commumties, in Entrepreneurship and quality in tourism in light of Polish and international research / sc. ed. G. Golembski. – Poznan : Wydaw. AE, 2008
Praktyczne zarzadzanie kapitalami firmy
  • R Dobbins
  • W Frackowiak
  • S F Witt
Dobbins R., Frackowiak W., Witt S.F., Praktyczne zarzadzanie kapitalami firmy, Paanpol, Poznan 1992.