Transparency, Integration, and the Costs of International Real Estate Investments

This paper investigates the importance of market institutions for the performance of international property investors during the 1996–2007 period. The results show that international property companies underperform local property companies in the early years of the sample period. This underperformance is driven by the political environment, the level of economic integration, and the transparency of the real estate market in target countries. The underperformance of internationals disappears in the later years of the sample period, and so does the significance of the aforementioned factors in explaining performance differences among international companies. These findings suggest that the increased transparency of the global real estate industry has leveled the playing field for foreign property investors.