Abstract/Summary

This thesis examines emerging real estate markets using Kuwait as an example. It is structured as a combination of three self-contained papers that complement each other. The first paper overcomes data limitations by using the limited existing data and different methodologies to improve the constructed indices. Because of data limitations, parametric methods could not be used. Instead, the central tendency method, with improvements, was applied and produced satisfactory indices. Approaches to improve performance included using the mean and median as central tendency, the type of property, monthly and quarterly observations, different weighting techniques, subsamples versus full samples, and stratification based on cities versus stratification based on long-term mean prices. As a result, 74 indices were constructed and their performance compared using out-of-sample forecasting methods. This paper overcame data limitations and constructed the first housing indices for Kuwait. This paper constructed the first housing indices for Kuwait. The second paper uses the indices constructed in the first paper to evaluate and study influences on the dynamics of the Kuwaiti housing market using Error Correction Model. The housing market seems highly driven by the shortage of housing supply, strong housing demand, the price of oil, and signs from investors and speculators. Furthermore, the market seems to be sensitive to tax regulations and terrorist events, but less sensitive to local and regional political events. The third paper considers an alternative source of funding for real estate development, called sukuk. Using the Dynamic Conditional CorrelationGeneralised Autoregressive Conditional Heteroskedasticity (DCC-GARCH) model to test the correlation between sukuk and bonds, it has been found that sukuk are highly similar to bonds and are not expected to provide much of a diversification advantage if included in a portfolio with other assets. Furthermore, their relationship to bonds increases in volatile times. Also found that different types of sukuk perform similarly