arXiv 31 May 2024 · cs.CE
arXiv:2405.20715 · PDF · DOI · OpenAlex · Extracted main text
The Japanese real estate market, valued over 35 trillion USD, offers significant investment opportunities. Accurate rent and price forecasting could provide a substantial competitive edge. This paper explores using alternative data variables to predict real estate performance in 1100 Japanese municipalities. A comprehensive house price index was created, covering all municipalities from 2005 to the present, using a dataset of over 5 million transactions. This core dataset was enriched with economic factors spanning decades, allowing for price trajectory predictions. The findings show that alternative data variables can indeed forecast real estate performance effectively. Investment signals based on these variables yielded notable returns with low volatility. For example, the net migration ratio delivered an annualized return of 4.6% with a Sharpe ratio of 1.5. Taxable income growth and new dwellings ratio also performed well, with annualized returns of 4.1% (Sharpe ratio of 1.3) and 3.3% (Sharpe ratio of 0.9), respectively. When combined with transformer models to predict risk-adjusted returns 4 years in advance, the model achieved an R-squared score of 0.28, explaining nearly 30% of the variation in future municipality prices. These results highlight the potential of alternative data variables in real estate investment. They underscore the need for further research to identify more predictive factors. Nonetheless, the evidence suggests that such data can provide valuable insights into real estate price drivers, enabling more informed investment decisions in the Japanese market.
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The works this paper leans on most, across its whole bibliography — not restricted to papers in our corpus. Ranked by composite intensity, which combines how often a work is mentioned, how many sections mention it, and how much of that falls in the main text rather than the appendix.
| Reference | Intensity | Mentions | Sections | Main text | |
|---|---|---|---|---|---|
| 1 | D. R. Capozza, P. H. Hendershott, and C. Mack, “An anatomy of price… (2004) An anatomy of price dynamics in illiquid markets: Analysis and evidence from local housing markets | 0.405 | 1 | 1 | 100% |
| 2 | R. Shiller and K. Case, “The efficiency of market for single-family… (1989) The efficiency of market for single-family homes | 0.405 | 1 | 1 | 100% |
| 3 | E.-I. Dumitrescu and C. Hurlin, “Testing for granger non-causality i… (2012) Testing for granger non-causality in heterogeneous panels | 0.405 | 1 | 1 | 100% |
| 4 | J. Gallin, “The long-run relationship between house prices and incom… (2003) The long-run relationship between house prices and income : Evidence from local housing markets | 0.405 | 1 | 1 | 100% |
| 5 | E. Glaeser, J. Gyourko, and A. Saiz, “Housing supply and housing bub… (2008) Housing supply and housing bubbles | 0.405 | 1 | 1 | 100% |
| 6 | S. Holly, H. Pesaran, and T. Yamagata, “A spatio-temporal model of h… (2010) A spatio-temporal model of house prices in the us | 0.405 | 1 | 1 | 100% |
| 7 | J. Meszaros, “A brief review of house price forecasting methods,” Re… (2024) A brief review of house price forecasting methods | 0.405 | 1 | 1 | 100% |
| 8 | F. Sa, “Immigration and house prices in the uk,” The Economic Journa… (2011) Immigration and house prices in the uk | 0.405 | 1 | 1 | 100% |
| 9 | A. Saiz, “Immigration and housing rents in american cities,” Journal… (2006) Immigration and housing rents in american cities | 0.405 | 1 | 1 | 100% |
| 10 | C. Shimizu and K. G. Nishimura, “Pricing structure in tokyo metropol… (2007) Pricing structure in tokyo metropolitan land markets and its structural changes: Pre-bubble, bubble, and post-bubble periods | 0.405 | 1 | 1 | 100% |
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