In system dynamics methodology, formal output analysis can create a basis for improving the struc... more In system dynamics methodology, formal output analysis can create a basis for improving the structure, so it is important to determine the variables to which the model is sensitive, by using a formal experimental design method. Moreover, such a research can allow comparing different methods for parametric sensitivity analysis. The purpose of this study is to understand different reactions of real estate prices to changes in different input factors. The study is carried out on a system dynamics model previously developed by the authors on real estate prices in Istanbul. The sensitivity of period, amplitude and mean of price oscillations to the changes in some selected variables of the model are analyzed. Two experimental sensitivity analysis designs, namely fractional factorial design and Latin hypercube sampling are used to measure the sensitivity of the model. The study shows that the factors that turn out to be most significant in the two designs are not the same. But the factors and interactions found significant by both techniques can be safely assumed to be highly influential.
This paper provides an analysis of the current structure of the UK property industry and those dr... more This paper provides an analysis of the current structure of the UK property industry and those drivers of liquidity within that market. The focus of the paper is on property sales, as opposed to rentals, and the factors that drive the constituents of the market to revolve and evolve through being under construction through various state changes to being demolished and their land being again available for further development. The paper describes the main factors that have gone into the production of a System Dynamics simulation of the property industry. The role and potential areas of impact of governmental policy are outlined. The effects of tightening worldwide credit regimes on the UK construction industry are included in the model. The relationships between the credit crunch and the behaviour of the construction industry are identified and are explored. The analysis presented in the paper concludes with potential scenarios for determining the future behaviour of the market.
Unlike in the US or the UK, research of real estate cycles in Germany exists only to a limited ex... more Unlike in the US or the UK, research of real estate cycles in Germany exists only to a limited extent. Therefore, this article follows three objectives:-To briefly introduce the reader to the theory of real estate cycles. Much has been written about theoretical approaches to analyze cycles. Real estate cycles and their phases are thus only described. For more detail, the attached bibliography gives an overview of articles that provide a good understanding of real estate cycles and their management.-To analyze the German office market empirically based on its observable and quantifiable variables. There is hardly any cycle research in Germany. Therefore, this paper is one of the first attempts to show the cyclical behavior of the German real estate market. Due to data unavailability and scarce data resources the large office markets have been chosen.-To present recommendations for the management decision process based on theoretical causes and empirical analysis. What can a decision maker do to assure that the cyclical behavior of a given real estate market is accounted for? As an example, real estate finance and project development are chosen since they reveal the clearest disproportion between current utilization of cyclical real estate management and its full potential.
In this paper, I try to get insight into the abnormally sustaining house price growth, or so-call... more In this paper, I try to get insight into the abnormally sustaining house price growth, or so-called house market bubble in Shanghai real estate industry by the tool of system dynamic method which especially focuses on the systems with highly dynamic characteristics, and many feedbacks relationships involved, which is consistent with the real estate market system. The most fundamental purpose of this project is to see whether it is the speculators' intervention that causes the problem of unsuitable high price in Shanghai house market or not and to see what kind of impact both on the society and economic field will be after the trend of speculation is quenched. This paper mainly divides the system into 6 parts, population and economy sector, family house demand sector, speculators' demand sector, speculators' profitability sector, house price sector, and house construction and sale sector to analyze how these subsystem can directly or indirectly work on the whole real estate industry in Shanghai.
The purpose of this study is to develop an understanding of the dynamics of the real estate marke... more The purpose of this study is to develop an understanding of the dynamics of the real estate market in Istanbul. As a result of the unavoidable delays in perception of the market state and construction of new buildings, the real estate market never reaches and equilibrium level. Due to the imbalance between house supply and demand, the prices in the real estate market show booms and busts. This study develops a system dynamics model for understanding the reasons of oscillations in real estate prices in Istanbul from the perspective of an important construction company. It includes dynamics created by interactions of factors effecting the speed and size of the construction side and sales of the new houses. The model created in this study mainly focuses on the economic balance aspect of the problem, and pays less attention to the dynamics of demand creation, the effects of costs and interest rates. This model can serve as a simulation basis for foreseeing the reaction of the market to some changes in the structure and external inputs. For validation, the model is run under some special conditions in which expected behaviors can be deduced and validated easily. At the end, different scenarios are generated to improve the current oscillatory behavior.
This paper attempts to take a fresh look at some of the major causes of the US housing market cri... more This paper attempts to take a fresh look at some of the major causes of the US housing market crisis as cited in the literature. In particular it investigates the effect of loosening of bank capital requirements, the government's push to increase home ownership, increase in homeowners' equity due to the housing boom, loose monetary policy, and change in bankruptcy rules. The paper performs controlled experiments with a system dynamics model to understand the fundamental and reinforcing causes of the crisis. The system dynamics approach allows for studying each cause in isolation as well in consort with the other causes, helping to assess whether they work as posited in the literature. Our findings indicate that with the exception of loose bank capital requirements the other reasons provide at best only a partial explanation of the crisis. Interestingly loose monetary policy actually prevents the boom from becoming too large. However on the downside, it discourages household savings and causes the bust to be worse, due to weak household finances that result from low savings.
The Korean real estate market is currently experiencing a slowdown due to the global economic cri... more The Korean real estate market is currently experiencing a slowdown due to the global economic crisis which has resulted from subprime mortgage lending practices. In response, the Korean government has enforced various policies, based on intend to deregulate real estate speculation, such as increasing the Loan to value ratio (LTV) in order to stimulate housing supply, demand and accompanying housing transactions. However, these policies have appeared to result in deep confusion in the Korean housing market. Furthermore, analyses for housing market forecasting—particularly those which examine the impact of the international financial crisis on the Korean real estate market—have been partial and fragmentary. Therefore, a comprehensive and systematical approach is required to analyze the real estate financial market and the causal nexus between market determining factors. Thus, with an integrated perspective and applying a system dynamics methodology, this paper proposes Korean Real Estate and Mortgage Market dynamics models based on the fundamental principles of housing markets, which are determined by supply and demand. As well, the potential effects of the Korean government's deregulation policies are considered by focusing on the main factor of these policies: the mortgage loan.
In this paper by means of a simple system dynamics model, we analyze the dynamics of housing affo... more In this paper by means of a simple system dynamics model, we analyze the dynamics of housing affordability in the context of real estate market of Iran. To do this we define an affordability index according to Iran's economic situation and show that in the absence of effective financial infrastructures, this index declines over time. To confront this problem, we analyze supply-side and demand-side housing policies. Moving into industrial methods of construction and increasing the volume of the construction loans are among supply-side housing policies. Also focusing on macroeconomic policies to reduce economic fluctuations and risk of investments in other markets is among demand-side housing policies.
This paper describes work in progress on Houdini: a system dynamics model of the Dutch housing ma... more This paper describes work in progress on Houdini: a system dynamics model of the Dutch housing market focused on explaining institutional structures leading to high price increases and obstructing new supply and on proposed reforms. The model is largely based on extensive literature on the woes of the Dutch housing market and was reviewed by a well-established expert panel, consisting of representatives of universities, ministries and national research and policy analysis institutes. The core model structure has its foundation in the diPasquale and Wheaton real estate markets model, an implicit system dynamics model. We report on the Houdini model structure, validation, base run, policy experiments and follow up activities.
Although the Korean government reported a housing supply ratio of more than 100% in the early 200... more Although the Korean government reported a housing supply ratio of more than 100% in the early 2000s, regional and class disparities in the Korean housing sector have not been correspondingly alleviated. Unfortunately, many Korean households are still enduring the economic burden caused by cyclical price variation, while many housing construction companies are on the verge of bankruptcy. To resolve the ever-expanding socioeconomic problems in the housing and real estate sector, the current Korean government proposed 831 Countermeasures, which has since met with much controversy. In an effort to address these issues, this paper utilizes a qualitative system dynamics model to elucidate and interrogate complex Korean housing mechanisms. By mapping bibliographical and experimental knowledge with causal loop diagrams, the positive and adverse effects of the 831 Countermeasures are also analyzed. Finally, based on the research findings, alternative policy guidelines are proposed that can be used to strengthen positive housing structures and obviate negative ones.
In this paper, the effect of state loans on real estate market prices in Iran is investigated thr... more In this paper, the effect of state loans on real estate market prices in Iran is investigated through a system dynamics approach. Although the government has given loans to the demand side for the purpose of stabilizing the housing price, the price has increased. In the proposed model, the effects of giving loans to the demand and supply sides of the market have been studied. The market includes investors as well as non-owner families and constructors in the supply and demand side. The results indicate that granting loans to the supply side for construction will be more beneficial than the demand side. In addition, the monetary policies of the government which influence the liquidity in society can influence the market behavior considerably. Thus, it is suggested that first, the government reduce the amount of liquidity in society and second, the government give state loans to the supply side of the market.
This paper provides a concise overview of the development of an integrated property and asset mar... more This paper provides a concise overview of the development of an integrated property and asset market model (IPAMM) for South African property markets, utilising the Pretoria office market as case study. The IPAMM simulates the interrelationships between property and asset markets in a diagrammatic quadrant model configuration. The Fischer-DiPasquale-Wheaton (FDW) real estate model, arguably the most advanced diagrammatic quadrant real estate model available at present, served as basis for the development of IPAMM. IPAMM is essentially a regression model based on a system of stochastic equations that captures the interrelationships between property and asset markets. The model advances beyond mere conceptualisation of these relationships to a quantified interpretation and application of the theoretical premises that represent the micro-foundations of economic behaviour in property and asset markets. JEL L85, R21, 31
This paper demonstrates that different types of real estate can have very different cyclic proper... more This paper demonstrates that different types of real estate can have very different cyclic properties. Empirically, it is shown that they do, and the question is posed as to what might distinguish between property markets where movements are largely stable responses to repeated economic shocks and those undergoing a continuing endogenous oscillation. A stock-flow model is built 1n which the future expectations of agents, the development lag, the degree of durability and market elasticities all can vary. Experiments reveal the dynamic behavior of the model vanes qu1te sharply with all these factors. Forward forecasting by agents leads to stability, while myopic behavior promotes oscillations. Oscillat1ons are also much more likely when supply is more elastic than demand, development lags are long, and asset durability is low.
This paper presents an overview of recent system dynamics works in the field of housing and real ... more This paper presents an overview of recent system dynamics works in the field of housing and real estate. It points out several connection points between system dynamics and real estate economics. In particular, we demonstrate that a common real estate model is easily translated to system dynamics as a useful template. We summarize the highlights of about ten recent real estate system dynamics papers and suggest that compiling literature reviews of system dynamics works in a particular area of interest is an easy starting point for relating to other academics and fostering the wider use of system dynamics. market cyclicality, real estate finance Purpose of this paper System dynamics unmistakably has perfect innate capabilities for helping responsible decision making in an increasingly complex world. But as Forrester (2007) sighed, the system dynamics community is not yet making the change for policy making it should aim at. One possible cause is that many system dynamicists are specialists in the SD method and generalists as regards to the themes involved. As a result, there are few position papers collecting the system dynamics insights of all relevant studies in one particular area of application. The purpose of this paper is providing such an overview of system dynamics works on recent dynamics in global real estate markets.
In system dynamics methodology, formal output analysis can create a basis for improving the struc... more In system dynamics methodology, formal output analysis can create a basis for improving the structure, so it is important to determine the variables to which the model is sensitive, by using a formal experimental design method. Moreover, such a research can allow comparing different methods for parametric sensitivity analysis. The purpose of this study is to understand different reactions of real estate prices to changes in different input factors. The study is carried out on a system dynamics model previously developed by the authors on real estate prices in Istanbul. The sensitivity of period, amplitude and mean of price oscillations to the changes in some selected variables of the model are analyzed. Two experimental sensitivity analysis designs, namely fractional factorial design and Latin hypercube sampling are used to measure the sensitivity of the model. The study shows that the factors that turn out to be most significant in the two designs are not the same. But the factors and interactions found significant by both techniques can be safely assumed to be highly influential.
This paper provides an analysis of the current structure of the UK property industry and those dr... more This paper provides an analysis of the current structure of the UK property industry and those drivers of liquidity within that market. The focus of the paper is on property sales, as opposed to rentals, and the factors that drive the constituents of the market to revolve and evolve through being under construction through various state changes to being demolished and their land being again available for further development. The paper describes the main factors that have gone into the production of a System Dynamics simulation of the property industry. The role and potential areas of impact of governmental policy are outlined. The effects of tightening worldwide credit regimes on the UK construction industry are included in the model. The relationships between the credit crunch and the behaviour of the construction industry are identified and are explored. The analysis presented in the paper concludes with potential scenarios for determining the future behaviour of the market.
Unlike in the US or the UK, research of real estate cycles in Germany exists only to a limited ex... more Unlike in the US or the UK, research of real estate cycles in Germany exists only to a limited extent. Therefore, this article follows three objectives:-To briefly introduce the reader to the theory of real estate cycles. Much has been written about theoretical approaches to analyze cycles. Real estate cycles and their phases are thus only described. For more detail, the attached bibliography gives an overview of articles that provide a good understanding of real estate cycles and their management.-To analyze the German office market empirically based on its observable and quantifiable variables. There is hardly any cycle research in Germany. Therefore, this paper is one of the first attempts to show the cyclical behavior of the German real estate market. Due to data unavailability and scarce data resources the large office markets have been chosen.-To present recommendations for the management decision process based on theoretical causes and empirical analysis. What can a decision maker do to assure that the cyclical behavior of a given real estate market is accounted for? As an example, real estate finance and project development are chosen since they reveal the clearest disproportion between current utilization of cyclical real estate management and its full potential.
In this paper, I try to get insight into the abnormally sustaining house price growth, or so-call... more In this paper, I try to get insight into the abnormally sustaining house price growth, or so-called house market bubble in Shanghai real estate industry by the tool of system dynamic method which especially focuses on the systems with highly dynamic characteristics, and many feedbacks relationships involved, which is consistent with the real estate market system. The most fundamental purpose of this project is to see whether it is the speculators' intervention that causes the problem of unsuitable high price in Shanghai house market or not and to see what kind of impact both on the society and economic field will be after the trend of speculation is quenched. This paper mainly divides the system into 6 parts, population and economy sector, family house demand sector, speculators' demand sector, speculators' profitability sector, house price sector, and house construction and sale sector to analyze how these subsystem can directly or indirectly work on the whole real estate industry in Shanghai.
The purpose of this study is to develop an understanding of the dynamics of the real estate marke... more The purpose of this study is to develop an understanding of the dynamics of the real estate market in Istanbul. As a result of the unavoidable delays in perception of the market state and construction of new buildings, the real estate market never reaches and equilibrium level. Due to the imbalance between house supply and demand, the prices in the real estate market show booms and busts. This study develops a system dynamics model for understanding the reasons of oscillations in real estate prices in Istanbul from the perspective of an important construction company. It includes dynamics created by interactions of factors effecting the speed and size of the construction side and sales of the new houses. The model created in this study mainly focuses on the economic balance aspect of the problem, and pays less attention to the dynamics of demand creation, the effects of costs and interest rates. This model can serve as a simulation basis for foreseeing the reaction of the market to some changes in the structure and external inputs. For validation, the model is run under some special conditions in which expected behaviors can be deduced and validated easily. At the end, different scenarios are generated to improve the current oscillatory behavior.
This paper attempts to take a fresh look at some of the major causes of the US housing market cri... more This paper attempts to take a fresh look at some of the major causes of the US housing market crisis as cited in the literature. In particular it investigates the effect of loosening of bank capital requirements, the government's push to increase home ownership, increase in homeowners' equity due to the housing boom, loose monetary policy, and change in bankruptcy rules. The paper performs controlled experiments with a system dynamics model to understand the fundamental and reinforcing causes of the crisis. The system dynamics approach allows for studying each cause in isolation as well in consort with the other causes, helping to assess whether they work as posited in the literature. Our findings indicate that with the exception of loose bank capital requirements the other reasons provide at best only a partial explanation of the crisis. Interestingly loose monetary policy actually prevents the boom from becoming too large. However on the downside, it discourages household savings and causes the bust to be worse, due to weak household finances that result from low savings.
The Korean real estate market is currently experiencing a slowdown due to the global economic cri... more The Korean real estate market is currently experiencing a slowdown due to the global economic crisis which has resulted from subprime mortgage lending practices. In response, the Korean government has enforced various policies, based on intend to deregulate real estate speculation, such as increasing the Loan to value ratio (LTV) in order to stimulate housing supply, demand and accompanying housing transactions. However, these policies have appeared to result in deep confusion in the Korean housing market. Furthermore, analyses for housing market forecasting—particularly those which examine the impact of the international financial crisis on the Korean real estate market—have been partial and fragmentary. Therefore, a comprehensive and systematical approach is required to analyze the real estate financial market and the causal nexus between market determining factors. Thus, with an integrated perspective and applying a system dynamics methodology, this paper proposes Korean Real Estate and Mortgage Market dynamics models based on the fundamental principles of housing markets, which are determined by supply and demand. As well, the potential effects of the Korean government's deregulation policies are considered by focusing on the main factor of these policies: the mortgage loan.
In this paper by means of a simple system dynamics model, we analyze the dynamics of housing affo... more In this paper by means of a simple system dynamics model, we analyze the dynamics of housing affordability in the context of real estate market of Iran. To do this we define an affordability index according to Iran's economic situation and show that in the absence of effective financial infrastructures, this index declines over time. To confront this problem, we analyze supply-side and demand-side housing policies. Moving into industrial methods of construction and increasing the volume of the construction loans are among supply-side housing policies. Also focusing on macroeconomic policies to reduce economic fluctuations and risk of investments in other markets is among demand-side housing policies.
This paper describes work in progress on Houdini: a system dynamics model of the Dutch housing ma... more This paper describes work in progress on Houdini: a system dynamics model of the Dutch housing market focused on explaining institutional structures leading to high price increases and obstructing new supply and on proposed reforms. The model is largely based on extensive literature on the woes of the Dutch housing market and was reviewed by a well-established expert panel, consisting of representatives of universities, ministries and national research and policy analysis institutes. The core model structure has its foundation in the diPasquale and Wheaton real estate markets model, an implicit system dynamics model. We report on the Houdini model structure, validation, base run, policy experiments and follow up activities.
Although the Korean government reported a housing supply ratio of more than 100% in the early 200... more Although the Korean government reported a housing supply ratio of more than 100% in the early 2000s, regional and class disparities in the Korean housing sector have not been correspondingly alleviated. Unfortunately, many Korean households are still enduring the economic burden caused by cyclical price variation, while many housing construction companies are on the verge of bankruptcy. To resolve the ever-expanding socioeconomic problems in the housing and real estate sector, the current Korean government proposed 831 Countermeasures, which has since met with much controversy. In an effort to address these issues, this paper utilizes a qualitative system dynamics model to elucidate and interrogate complex Korean housing mechanisms. By mapping bibliographical and experimental knowledge with causal loop diagrams, the positive and adverse effects of the 831 Countermeasures are also analyzed. Finally, based on the research findings, alternative policy guidelines are proposed that can be used to strengthen positive housing structures and obviate negative ones.
In this paper, the effect of state loans on real estate market prices in Iran is investigated thr... more In this paper, the effect of state loans on real estate market prices in Iran is investigated through a system dynamics approach. Although the government has given loans to the demand side for the purpose of stabilizing the housing price, the price has increased. In the proposed model, the effects of giving loans to the demand and supply sides of the market have been studied. The market includes investors as well as non-owner families and constructors in the supply and demand side. The results indicate that granting loans to the supply side for construction will be more beneficial than the demand side. In addition, the monetary policies of the government which influence the liquidity in society can influence the market behavior considerably. Thus, it is suggested that first, the government reduce the amount of liquidity in society and second, the government give state loans to the supply side of the market.
This paper provides a concise overview of the development of an integrated property and asset mar... more This paper provides a concise overview of the development of an integrated property and asset market model (IPAMM) for South African property markets, utilising the Pretoria office market as case study. The IPAMM simulates the interrelationships between property and asset markets in a diagrammatic quadrant model configuration. The Fischer-DiPasquale-Wheaton (FDW) real estate model, arguably the most advanced diagrammatic quadrant real estate model available at present, served as basis for the development of IPAMM. IPAMM is essentially a regression model based on a system of stochastic equations that captures the interrelationships between property and asset markets. The model advances beyond mere conceptualisation of these relationships to a quantified interpretation and application of the theoretical premises that represent the micro-foundations of economic behaviour in property and asset markets. JEL L85, R21, 31
This paper demonstrates that different types of real estate can have very different cyclic proper... more This paper demonstrates that different types of real estate can have very different cyclic properties. Empirically, it is shown that they do, and the question is posed as to what might distinguish between property markets where movements are largely stable responses to repeated economic shocks and those undergoing a continuing endogenous oscillation. A stock-flow model is built 1n which the future expectations of agents, the development lag, the degree of durability and market elasticities all can vary. Experiments reveal the dynamic behavior of the model vanes qu1te sharply with all these factors. Forward forecasting by agents leads to stability, while myopic behavior promotes oscillations. Oscillat1ons are also much more likely when supply is more elastic than demand, development lags are long, and asset durability is low.
This paper presents an overview of recent system dynamics works in the field of housing and real ... more This paper presents an overview of recent system dynamics works in the field of housing and real estate. It points out several connection points between system dynamics and real estate economics. In particular, we demonstrate that a common real estate model is easily translated to system dynamics as a useful template. We summarize the highlights of about ten recent real estate system dynamics papers and suggest that compiling literature reviews of system dynamics works in a particular area of interest is an easy starting point for relating to other academics and fostering the wider use of system dynamics. market cyclicality, real estate finance Purpose of this paper System dynamics unmistakably has perfect innate capabilities for helping responsible decision making in an increasingly complex world. But as Forrester (2007) sighed, the system dynamics community is not yet making the change for policy making it should aim at. One possible cause is that many system dynamicists are specialists in the SD method and generalists as regards to the themes involved. As a result, there are few position papers collecting the system dynamics insights of all relevant studies in one particular area of application. The purpose of this paper is providing such an overview of system dynamics works on recent dynamics in global real estate markets.
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