Location determinants of foreign direct investment in real estate

Extract

[...] As a result of this study, the model for FDI in real estate can be expressed as follows: RE = a0 + a1 MA + a2 RES + a3 CO + a4 POL + a5 CUL + a6 COM MA (Inflation rate, population growth) RES (Education of workforce) CO (Productivity) POL (Country risk) CUL (Long- term orientation) COM (Company specific strategic considerations) The implication for direct investors in foreign real estate derived from this study is that the indicators named above should be analyzed primarily when a location decision in FDI in real estate is made. [...]

[...] The comparison of those values with actual FDI flows in real estate shows that the calculated potential seems to be influential to location decisions. The Inward FDI Potential Index captures several factors (apart from market size) that are expected to affect a country's attractiveness to foreign investors (UNCTAD, 2008). The analysis shows that this, in fact, is in line with actual decision-making. It can be concluded, that UNCTAD combines interesting determinants in its indicator and, thus, provides an orientation guide for foreign direct investors. [...]

[...] Hypothesis This study attempts to answer the question which factors determine foreign investors‟ location decision for investing in the real estate market. As shown in the literature review several factors influence the output of a real estate investment and therefore need to be taken into consideration when deciding on an investment's location. Based on the previous discussion, the proposed model for FDI in real estate is as follows: RE = f RES, CO, POL, CUL) The dependent variable: RE inflows of FDI in real estate into the host market The influencing factors discussed have been grouped into five areas and demonstrate the independent variables: MA Markets RES Resources CO Production costs POL Political conditions CUL Cultural and linguistic affinities 27 The expected outcome of this study is that decision-makers are influenced by the above mentioned factors when choosing a location for FDI in real estate. [...]

[...] Among other topics the author investigates determinants influencing the choice of locations FDI in real estate is less examined (Gerlowski 1994, Moshirian & Pham 2000, Sirmans & Worzala 2003). In contrast to other investments, real estate investments are founded on highly differentiated, long-lasting buildings spread across various locations with diverse characteristics. In this complex investment market, the real estate sector is dominated by private knowledge, which is expensive to access. Thus, information becomes a key asset. The hypothesis tested in this study is based on Dunning's eclectic theory (1980) which is used as a framework. [...]

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