Analysis on Determinants of Real Estate Equity Investment among Alternative Investments in Financial Institutions
Authors:   Korean Association Of Public Policy, Shim Eui Sup , Lim Dong Hyeock 
Published: December 2022

Interest rates, which have continued to fall since the 2008 financial crisis, have recently fallen to 0.5% of the Bank of Korea's benchmark interest rate, entering an ultra-low interest rate era. Investors in financial institutions are paying attention to alternative investment assets to cope with the weakening profitability of their investments, as it is difficult to expect profitability from bonds and stocks, which are traditional investment assets. Among them, real estate investment has steadily become an essential factor in institutional investors' portfolios, as real estate investments can be guaranteed high returns depending on location and supply and demand conditions, but are relatively less affected by financial market trends. In particular, financial institutions, which are actively expanding alternative investments due to falling operating returns due to the worsening economy, are focusing on profitable real estate equity investments. However, despite the growing demand for real estate Equity investment by financial institutions, there are few specific investment criteria for which investment impact factors are determined, in the case of domestic real estate investment decision-makers, few have focused on investment. The objective of this study is to empirically analyze and identify the investment impact factors on the investment satisfaction and willingness of financial institutions in the real estate equity investment market, and to specifically analyze the differences in the types of investment impact factors. This study first examined the preceding research to derive the influences of real estate equity investment, and conducted a survey on investors from financial institutions. In addition, investor characteristics used descriptive statistical analysis, and factor analysis was conducted to verify the validity of the survey variables. Based on this, a regression analysis was conducted to test the hypothesis, and additionally a descriptive statistical analysis was used to analyze differences in the importance of investment impact factors depending on the type of financial institution. The results of the study are summarized as follows. First, as a result of hypothesis tests on investment impact factors and investment satisfaction for investors in financial institutions, location characteristics, profitability, and stability were adopted, and location characteristics were the factors that affected investment satisfaction the most. A hypothesis test of investment impact factors and willingness to reinvest in financial institutions showed that profitability and stability had a positive impact on the willingness to reinvest. Second, after analyzing the difference in importance of investment impact factors according to the type of financial institution, bank investors value stability and capital investors value timeliness the most among the investment impact factors. Investor in insurance companies put the most importance on profitability. Overall, investors in financial institutions participating in real estate equity investments demonstrate similar relationships between investment impact factors, investment satisfaction, and reinvestment intentions, and empirically analyzed that there are also differences in investment impact factors. These findings suggest that in financial institutional investment markets, financial institutional investors make decisions based on profitability, stability and location characteristics, but consider differences in investment propensity for financial institutions.