Institutional investment in residential property : the Swiss, Dutch and Swedish cases
This thesis attempts for the first time to shed light on the high involvement of institutional
investors in the residential property market in Switzerland, the Netherlands and Sweden. In
order to understand the reasons underlying this unusual institutional behaviour, a triangulated
approach was followed, where a quantitative analysis was combined with qualitative analysis.
The triangulated approach emphasizes the benefits of distinct but complementary research
methods rather than advocating a single style of research. The approach combines the meanvariance
analysis extended through bootstrap simulation with a postal survey and a crosscountry
comparative study of institutional investment and housing systems. The central
hypothesis of the thesis is that the different institutional allocations to residential property across
countries cannot be explained entirely by a model of portfolio choice, without taking into
account the different national characteristics of institutional investment and housing systems.
Chapter I provides an introduction to the thesis. Chapter 2 discusses modern portfolio theory
when applied to property. Chapter 3 examines the techniques of and problems with the
estimation of housing returns. Chapter 4 surveys the literature on the role of residential property
in a mixed asset portfolio. Chapter 5 outlines the methodology. Chapter 6 and Chapter 7 detail
the comparative analysis of institutional investor and housing systems respectively. Chapter 8
surveys the institutional investors' attitudes and perceptions of residential property as an asset
group. Chapter 9 evaluates residential property as an institutional asset group according to three
financial criteria (size of rented market potentially available for institutional investment, meanvariance
performance and hedge against inflation ability). The dissertation conclusions are as
follows: (1) The Swiss and Dutch institutional residential ownership puzzle seems to be
explained by a composite of factors relating to the institutional investment and housing systems.
(2) The pension system design and the legal, regulatory and fiscal environment within which the
institutional investors operate seem to provide new insights into the institutional investors'
allocation to property and specifically to residential property. (3) Government intervention in
the housing market, namely in terms of rent regulation and tenure support, influences the
investment characteristics of residential property, which, in turn, helps to explain why Swiss
and Dutch institutional investors allocate an unusual high fraction of their property portfolio to
the residential private rented sector. (4) The MPT analysis concludes that residential property
has a role in mixed asset institutional portfolios (5) Consistent with the empirical study the
survey suggests that residential housing is seen primarily as an earning asset group able to
provide diversification benefits even when institutional portfolios already include nonresidential