FIG Peer Review Journal


Real Estate Indices as a Barometer of Stable Real Estate Returns and Predictor of Real Estate Risks During Real Estate Boom or Burst Cycles (5526)

Manohar Velpuri (Singapore) and Fabio Pinna (Italy)
Mr. Manohar Velpuri
Commission 9, FIG
#05-147, block 437
Street 43, Tampines
Corresponding author Mr. Manohar Velpuri (email: mano_velpuri[at], tel.: +85264626675)

[ abstract ] [ paper ] [ handouts ]

Published on the web 2012-03-08
Received 2011-11-01 / Accepted 2012-02-02
This paper is one of selection of papers published for the FIG Working Week 2012 in Rome, Italy and has undergone the FIG Peer Review Process.

FIG Working Week 2012
ISBN 97887-90907-98-3 ISSN 2307-4086


Global financial crisis and debt crisis in recent times has drawn increased attention towards modern banking regulation and surveillance during asset management. One such important asset that needs attention in today’s globally economic scenario is real estate. Real estate bubbles decrease growth in the returns in investments and puts government policies under severe scrutiny. Governments around the world are cautious and structuring policies in a way to tackle crisis that might be caused due to real estate bubbles. Standard measures for controlling real estate bubbles are including stamp duties and lower mortgage percentages. To understand the timing and causes of these bubbles governments are encouraging comprehensive real estate indices that provide full picture of the changes in the real estate market and the prices during real estate management. Real estate index that is comparable cross regionally and across countries is essential for understanding and or forecast an emerging scenario of global economic crisis triggered by real estate bubbles. Risks associated with real estate market vary from region to region. An index which has uniformity and feasibility to provide cross-regional comparison can aid in solving the problems caused due heterogeneous nature of risk assessment data. Risks of default in mortgage loans, banking risks and exposures could also be predicted to reality in real estate. It is in this context this paper dwells the key aspects of real estate pricing indices and their importance in risk assessment and modelling. Risk calculation based on operating cash flow , finance structure and credit and rent volatility are to be supplemented to the real estate indices to understand the nature of the real estate bubble and to forecast the impact of the emerging real estate bubbles. In this paper an effort is made to present the interpretation of real estate bubbles in Asian countries like Singapore and Hongkong as a particular reference of China. An extension is also made to interpret emerging real estate bubbles in few other European countries. A possibility to assess the risk of specific properties and measure the expected contribution of such properties to the enterprise-wide risk of typical institutional portfolios would mean a possible prediction of the changing investment scenarios in assets like properties in real estate. This paper tries to bridge the trading gap of investor’s reactions although the indices are capturing accurate variations in the property prices.
Keywords: Risk management; Real estate development; investment management; real estate bubbles