Introducing REITs in Europe - The effect on housing real estate

Abstract

After the financial crisis of 2007-2008, the world experienced how an unhealthy increase in housing real estate prices could contribute to a financial crisis with severe consequences for the world economy.

This thesis asks the question if the introduction of real estate investment trusts (REITs), recently enabled in several countries in the EU through systems of legislation referred to as REIT regimes, affects the price of housing real estate in a country. The effect is tested by observing the growth rate of housing real estate prices after the legislation has been enacted using a fixed effects panel data model. The result suggests a significant short-term increase in the growth rate of housing real estate prices during the years following the enactment of legislation. This result could contribute to higher awareness regarding the effects of recent legislation and help legislators and investment professionals in avoiding economic shocks such as the financial crisis of 2007-2008.