Exploring the determinants of real estate liquidity from an alternative perspective: censored quantile regression in rea
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Exploring the determinants of real estate liquidity from an alternative perspective: censored quantile regression in real estate research Marcelo Cajias1 · Philipp Freudenreich2 · Anna Freudenreich2
© The Author(s) 2020
Abstract In this paper, the liquidity (inverse of time on market) of rental dwellings and its determinants for different liquidity quantiles are examined for the seven largest German cities. The determinants are estimated using censored quantile regressions in order to investigate the impact on very liquid to very illiquid dwellings. As market heterogeneity is not only observed between cities but also within a city, each of the seven cities is considered individually. Micro data for almost 500,000 observations from 2013 to 2017 is used to examine the time on market. Substantial differences in the magnitude and direction of the regression coefficients for the different liquidity quantiles are found. Furthermore, both the magnitude and direction of the impact of an explanatory variable on the liquidity, differ between the cities. To the best of the authors’ knowledge this is the first paper, to apply censored quantile regressions to liquidity analysis of the real estate rental market. The model reveals that the proportionality assumption underlying the Cox proportional hazards model cannot be confirmed for all variables across all cities, but for most of them. Keywords Residential · Housing · Liquidity · Censored quantile regression · Time on market
Electronic supplementary material The online version of this article (https://doi.org/10.1007/s1157 3-020-00988-w) contains supplementary material, which is available to authorized users. * Philipp Freudenreich [email protected] Marcelo Cajias [email protected] Anna Freudenreich [email protected] 1
Patrizia Immobilien AG, Fuggerstrasse 26, 86150 Augsburg, Germany
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International Real Estate Business School, University of Regensburg, Universitaetsstrasse 31, 93053 Regensburg, Germany
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M. Cajias et al.
JEL Classification C31 · C34 · R21 · R32
1 Introduction The concept of asset liquidity in the residential rental market is somewhat blurred. In the investment market, asset liquidity traditionally measures the time it takes the owner to turn an asset into cash. In the rental market on the other hand, asset liquidity measures the time it takes the landlord to find a new tenant, i.e. from introducing the dwelling to the market until the signing of the rental contract. In this paper, liquidity is defined as the inverse of the time on market (TOM) of rental dwellings, i.e. the higher the time on market, the lower the liquidity.1 Whether the letting process is quick or slow, depends mainly, on the initial asking rent, the structural quality and location of the asset, demand for space, and the overall market conditions. A detailed understanding of these major drivers of marketing time of rental dwellings is the objective of this paper. To extract more insightful information from the available d
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