Location determinants of foreign direct investment in real estate

Type :

Term papers

Pages :

23 pages

Format :

.doc

Published date :

04/24/2009

Category :

Business & market

Sub category :

Business strategy

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Summary :

Introduction
A study of global real estate market
Research purpose and objective
Outline of the study
Review of the literature
1. Motives for FDI
2. The eclectic paradigm
3. Locational determinants
Development state of an economy
What is inflation?
FDI in other industries
Methods of analysis
Conclusion
References

Abstract

The global real estate market is complexly structured and highly competitive. In order to diversify the portfolio and to achieve the highest risk adjusted return, real estate firms invest across national borders. The choice of the most favorable location is of highest importance for the success of the investment. This study analyzes determinants for the location decision in FDI in real estate. Based on Dunning‟s Eclectic Paradigm five determinants have been tested. As Dunning refers to FDI over all industries this study enlarges the scope by real estate specific considerations. Different aspects of direct real estate investment are discussed and added to Dunning's theory. The study shows that mainly economic factors of the local market, the availability of resources, production costs, political conditions as well as cultural aspects influence the choice of a location. More precisely, the infrastructure, the growth of population, the degree of education, the productivity, the country risk and the degree of long-term IV orientation of the host economy are primarily relevant when the decision in favors of a location for FDI in real estate is made. The indicators give a good idea of location decision-making in the real estate industry. However, it follows from the results that firm specific strategic considerations are of high relevance to the investor and influence the decision more than the analyzed determinants. Risks are found to be less important as multinationals have access to global financial markets and can hedge capital and economic risks as well as translation and transaction exposures.