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Papers by Philippe Bélanger
Journal of Sustainable Real Estate, 2018
Abstract We investigate the impact of flood risk on the Canadian housing market. We combine a var... more Abstract We investigate the impact of flood risk on the Canadian housing market. We combine a variety of large heterogeneous sets of data, both structured and unstructured, that allows taking into ...
Housing Studies, 2017
Abstract This paper examines the impact of flood risk on the value of English residential propert... more Abstract This paper examines the impact of flood risk on the value of English residential properties. We find that a location within a flood zone significantly lowers property values even if we control for the proximity to a watercourse, the history of flooding and neighbourhoods effects. Although the flood risk discount is more compelling for waterfront properties, it is still highly significant for dwellings further from the water. The markdown arises around 2004–2005, which coincides with the publication of detailed flood maps by the UK Environment Agency and with a more risk-based pricing of flood insurance policies. As expected, the effect of flood risk on house prices is stronger in the months following major flood events but, interestingly, it almost disappears in a hot market when buyers have arguably less negotiating power.
24th Annual European Real Estate Society Conference, 2017
Background – Whether due to climate change or due to bad urban planning, flooding is an important... more Background – Whether due to climate change or due to bad urban planning, flooding is an important issue around the world. The point about climate change impact on see level and precipitation intensity is well known. Those impact will eventually increase the number of flooding area. Another reason for change in flooding area is the urban development and bad water management planning. Quebec City, in Canada, has been sued in court over the impact of flooding likely due to deficient water management for the city. In the same area, flooding area maps have been updated to take into account new risk. Been in these flooding area is likely to have an impact on real estate value. Purpose – This paper intend to bring a contribution about the value lost in flooding area. The paper present preliminary result using Quebec (Canada) data and include the impact of media coverage of risk in the pricing process. Approach / Methodology / Design – We use transaction databases, geographic information system (GIS) and building characteristics in order to analyze the impact of been in flooding area on the value of a residential building. Since houses near water usually has value added we control for the water shore distance. Literature shows that flooding area usually has impact on real estate value. Nevertheless some study show mitigated results. Uk data has been used to develop a methodology and are presented in a forthcoming paper. Quebec City data are based on transaction prices for the last 5 years as well as official municipality valuation. Results – As of now, results are preliminary but at the time of the conference, we will have the results for Quebec city that we will be able to relate the result to those of UK presented last year at ERES 2016. Limitations / implications – Quebec City data has individual characteristics associate with houses but the historical data are 5 years (compare with 20 for UK) and for a smaller area than what was available for UK. Practical implications – This is relevant to compute the value of mitigation installations (dam) or to assess the compensation to be offered to owner impacted by area that are newly at risk of flooding. Flood related depreciation is also relevant for insurance industry for coverage valuation. Originality / Value – We use GIS data allowing and use original data from Quebec which include a high media profile area and several "normal" areas.
Areas/Paper type – 08. Integration of renewable energy in the built environment, Methodology Back... more Areas/Paper type – 08. Integration of renewable energy in the built environment, Methodology Background – Today’s simulation technology in engineering and architecture are very impressive. As a result technology developers have a good idea of the resulting energy consumption of a building. They even have an idea of the distribution of the possible output. At CISBAT 2011, some authors presented innovative technologies with detailed impact on energy consumption (energy quantity, type, time of consumption) but very limited value conclusion. When asked why with such data quality they did not have more information about value. They answered with a question. Do you know of a paper that describes the methodology to achieve such valuation? Purpose – This paper intends to present a simple method that allows energy efficient technology to better assess the value of the energy savings. This value can be compared to the cost underlying this improved efficiency. Approach / Methodology / Design –...
Proceedings of the 20th Annual European Real Estate Society Conference - Vienna, Austria, 2013
Energy efficiency is one of the more economically sounds way to sustainability. Real Estate accou... more Energy efficiency is one of the more economically sounds way to sustainability. Real Estate accounts for 30% of energy consumption in most developed countries. It also accounts for more than 30% of GHG emission. In the last several years many research have been looking to energy efficiency technology. Very few of them include the future energy price forecast in their valuation. Very few of them include the fact that different energy source savings may have different value. This paper demonstrates that one euro of annual energy savings in different source has a very different value when we account for expected future cost. It also underlines the fact that energy source prices are more or less volatile depending on sources. This should imply different discount rate for investment in technology that involves savings of those energy sources with high prices volatility. Following this demonstration the paper support the idea that whoever assesses the value of energy efficiency have to make assumption on energy source saved, future energy prices, appropriate discount rate and maturity of the investment. When researchers and professionals omit to do those assumptions explicitly they do it implicitly.Hedonic models have been widely used by researcher to assess the value of buildings properties. We use forecast at the moment of the transaction to underline the integration of energy efficiency value in building valuation with hedonic models. We use a US database to investigate the relationship between building energy consumption and building value. We also investigate this relationship with rent. Results suggest that the energy consumption that impacts the rent value is different from those who impact transaction price. It appears that overall energy cost impact the rent value, but not the transaction price.In conclusion, the economic sustainability assessment of an energy savings investment must take into account energy sources and future price.
Background – Photovoltaic (PV) panels are an important component of passive and positive energy b... more Background – Photovoltaic (PV) panels are an important component of passive and positive energy buildings. The value of the PV depends on the price of the electricity and on the quantity of energy produced. PV investors does not want to maximize the quantity of energy produced but the cash flow generated by the electricity produced. Electricity prices are cyclical, so is they depends on the time of the days and on the day of the year. Electricity prices are different around the globe, so are solar radiation. The optimum combination of high price and high radiation is not easy to find. The best locations to install PV panel are locations where radiation and prices combination merge together to create the maximum value. Purpose – This paper intend to present a method that integrate weather data and market price dynamic in order to find the fundamental value of distributed PV production. In a second time, we use this approach to find the fundamental value of distributed PV production a...
Les proprietaires immobiliers du canton de Vaud font tres peu appel aux subventions du Programme ... more Les proprietaires immobiliers du canton de Vaud font tres peu appel aux subventions du Programme Bâtiments qui encourage les renovations energetiques. L’etude «Analyse des barrieres a l'assainissement energetique des bâtiments dans le canton de Vaud» mandatee par le Canton de Vaud a permis d’identifier certaines causes et propose des mesures pour remedier a cet etat de fait. Parmi les facteurs pouvant expliquer le phenomene, l’etude a identifie des facteurs juridiques comme l’application du droit bail dans le canton, structurels comme le faible taux de maisons individuelles occupees en residence principale, economiques et financiers comme l’absence de soutien cantonal aux audits energetiques ou encore certains facteurs socio-culturels.
This thesis has two objectives. The first objective is to better understand the value of energy e... more This thesis has two objectives. The first objective is to better understand the value of energy efficiency in buildings and its relationship to secondary market real estate prices. The second objective is to understand the cost of the implied insurance included in fixed rate mortgage (FRM) and borne by the borrower. My observations show that most research in energy efficiency ignore or make implicit assumptions about certain parameters, energy source, future energy prices and discount rates, which may have considerable impact on the energy efficiency value. In the first chapter, I develop a tool that can estimate the value of a given energy efficient investment by taking into account these parameters, the present value of a unit of energy (PVU). The PVU fluctuates throughout time and is very sensitive to the economic scenario considered (expected regulation, expected demand, and the consequent energy price path). Then, I use this tool to test the relationship between energy efficiency and real estate prices. I find that even with evidence of the tool’s informational content and explicit assumption on parameters that should impact the value of energy efficiency, real estate prices are not following the expected relationship. This suggests that either energy efficient buildings bear a potential abnormal return investment possibility or that real estate investors use energy price forecasts that are not in line with authority’s ones. In the second chapter, this thesis investigates mortgage financing. First, I determine the implicit insurance cost of fixed rate mortgage (FRM) in comparison with adjustable-rate mortgage (ARM). In this chapter, I develop a method, based on the parameterization of previous case studies with formal assumptions, in order to compute the cost of FRM. I look at the properties of the risk hedged from the household perspective. This chapter brings forth three innovations. First, this is the first research to look at the FRM cost relative to ARM in Switzerland. Secondly, this thesis is the first research that defines and explore the risk hedged. Thirdly, I develop an alternative to the conventional interest rate spread, often used to assess the cost of FRM. In addition, I characterise the risk in terms of distribution and dependence.
Plug-In Hybrid Electric Vehicle (PHEV) Québec Test ... Program: A Major Real-World Test Study on ... more Plug-In Hybrid Electric Vehicle (PHEV) Québec Test ... Program: A Major Real-World Test Study on Financial, ... Nicolas Dehlinger, Michaël Desjardins, Maxime Dubois, Jean Longchamps, Louis Tremblay Laboratoire d'Électrotechnique, d'Électronique de Puissance et de ...
Accounting & Finance, 2013
This paper contributes to the debate on the impact of accounting measurement rules for financial ... more This paper contributes to the debate on the impact of accounting measurement rules for financial assets. We examine the association between fair value accounting for financial assets and market price volatility for nonfinancial firms in an experimental setting. One group of participants was provided with financial statements where held-for-trading securities were reported at fair market value (FVA). Another group received financial statements with investments reported at historical cost (HCA). Controlling for accounting data, we find no systematic difference between FVA and HCA for three different measures of market price volatility, despite higher earnings volatility and marginally heavier trading under FVA.
The Journal of Risk Finance, 2018
Purpose Previous studies have shown the VIX futures tend to roll-down the term structure and conv... more Purpose Previous studies have shown the VIX futures tend to roll-down the term structure and converge towards the spot as they grow closer to maturity. The purpose of this paper is to propose an approach to improve the volatility index fear factor-level (VIX-level) prediction. Design/methodology/approach First, the authors use a forward-looking technique, the Heath–Jarrow–Morton (HJM) no-arbitrage framework to capture the convergence of the futures contract towards the spot. Second, the authors use principal component analysis (PCA) to reduce dimensionality and save substantial computational time. Third, the authors validate the model with selected VIX futures maturities and test on value-at-risk (VAR) computations. Findings The authors show that the use of multiple factors has a significant impact on the simulated VIX futures distribution, as well as the computations of their VAR (gain in accuracy and computing time). This impact becomes much more compelling when analysing a portfo...
Proceedings of the 19th Annual European Real Estate Society Conference - Edinburgh, Scotland, 2012
A huge part of housing finance is related to mortgage. In Europe, loan-to-value range between 50%... more A huge part of housing finance is related to mortgage. In Europe, loan-to-value range between 50% and 85% for mortgage while the mortgage market/GDP ratio increased by 20% between 1998 and 2010. In most developed countries housing is the most important household's investment or expenditure. This investment is generally leveraged by mortgage borrowing. The mortgage can bear fixed or variable interest rate; both with their pros and cons. Fixed rate allows easier budgeting over years since the bank bear the interest rate risk. This property of fixed rate mortgage is often assimilated to insurance that hedge against monthly payment fluctuation. Usually, initial variable rate is cheaper since the interest rate risk is assumed by the borrower. Yet, there has been surprisingly little work on mortgage decisions from the perspective of the household. Instead, most research on mortgages has been conducted by real estate or fixed-income securities specialists who are interested in pricing mortgage-backed derivatives. This paper proposes a method to assess the relative cost of fixed rate mortgage implied insurance for the borrower. Thus, we link the insurance cost with insurance premium concept and the related hedged risk. The proposed method is applied to Swiss data. This method offers a sound's basis for comparison of the cost of fixed mortgage rate in time and among countries. It also allows the exploration of the relationship between fixed rates implied insurance cost and people's preference for the financial product. We use the method to analyse mortgage rate between 2002 and 2012. We compare variables rates (Libor and bank's variable rate) with five and three years fixed rate. We find that most of the time fixed implied insurance is costly for the borrower. This cost represents a value between 0.5% and 7% of the total initial mortgage when compared with Libor.
Journal of Sustainable Real Estate, 2018
Abstract We investigate the impact of flood risk on the Canadian housing market. We combine a var... more Abstract We investigate the impact of flood risk on the Canadian housing market. We combine a variety of large heterogeneous sets of data, both structured and unstructured, that allows taking into ...
Housing Studies, 2017
Abstract This paper examines the impact of flood risk on the value of English residential propert... more Abstract This paper examines the impact of flood risk on the value of English residential properties. We find that a location within a flood zone significantly lowers property values even if we control for the proximity to a watercourse, the history of flooding and neighbourhoods effects. Although the flood risk discount is more compelling for waterfront properties, it is still highly significant for dwellings further from the water. The markdown arises around 2004–2005, which coincides with the publication of detailed flood maps by the UK Environment Agency and with a more risk-based pricing of flood insurance policies. As expected, the effect of flood risk on house prices is stronger in the months following major flood events but, interestingly, it almost disappears in a hot market when buyers have arguably less negotiating power.
24th Annual European Real Estate Society Conference, 2017
Background – Whether due to climate change or due to bad urban planning, flooding is an important... more Background – Whether due to climate change or due to bad urban planning, flooding is an important issue around the world. The point about climate change impact on see level and precipitation intensity is well known. Those impact will eventually increase the number of flooding area. Another reason for change in flooding area is the urban development and bad water management planning. Quebec City, in Canada, has been sued in court over the impact of flooding likely due to deficient water management for the city. In the same area, flooding area maps have been updated to take into account new risk. Been in these flooding area is likely to have an impact on real estate value. Purpose – This paper intend to bring a contribution about the value lost in flooding area. The paper present preliminary result using Quebec (Canada) data and include the impact of media coverage of risk in the pricing process. Approach / Methodology / Design – We use transaction databases, geographic information system (GIS) and building characteristics in order to analyze the impact of been in flooding area on the value of a residential building. Since houses near water usually has value added we control for the water shore distance. Literature shows that flooding area usually has impact on real estate value. Nevertheless some study show mitigated results. Uk data has been used to develop a methodology and are presented in a forthcoming paper. Quebec City data are based on transaction prices for the last 5 years as well as official municipality valuation. Results – As of now, results are preliminary but at the time of the conference, we will have the results for Quebec city that we will be able to relate the result to those of UK presented last year at ERES 2016. Limitations / implications – Quebec City data has individual characteristics associate with houses but the historical data are 5 years (compare with 20 for UK) and for a smaller area than what was available for UK. Practical implications – This is relevant to compute the value of mitigation installations (dam) or to assess the compensation to be offered to owner impacted by area that are newly at risk of flooding. Flood related depreciation is also relevant for insurance industry for coverage valuation. Originality / Value – We use GIS data allowing and use original data from Quebec which include a high media profile area and several "normal" areas.
Areas/Paper type – 08. Integration of renewable energy in the built environment, Methodology Back... more Areas/Paper type – 08. Integration of renewable energy in the built environment, Methodology Background – Today’s simulation technology in engineering and architecture are very impressive. As a result technology developers have a good idea of the resulting energy consumption of a building. They even have an idea of the distribution of the possible output. At CISBAT 2011, some authors presented innovative technologies with detailed impact on energy consumption (energy quantity, type, time of consumption) but very limited value conclusion. When asked why with such data quality they did not have more information about value. They answered with a question. Do you know of a paper that describes the methodology to achieve such valuation? Purpose – This paper intends to present a simple method that allows energy efficient technology to better assess the value of the energy savings. This value can be compared to the cost underlying this improved efficiency. Approach / Methodology / Design –...
Proceedings of the 20th Annual European Real Estate Society Conference - Vienna, Austria, 2013
Energy efficiency is one of the more economically sounds way to sustainability. Real Estate accou... more Energy efficiency is one of the more economically sounds way to sustainability. Real Estate accounts for 30% of energy consumption in most developed countries. It also accounts for more than 30% of GHG emission. In the last several years many research have been looking to energy efficiency technology. Very few of them include the future energy price forecast in their valuation. Very few of them include the fact that different energy source savings may have different value. This paper demonstrates that one euro of annual energy savings in different source has a very different value when we account for expected future cost. It also underlines the fact that energy source prices are more or less volatile depending on sources. This should imply different discount rate for investment in technology that involves savings of those energy sources with high prices volatility. Following this demonstration the paper support the idea that whoever assesses the value of energy efficiency have to make assumption on energy source saved, future energy prices, appropriate discount rate and maturity of the investment. When researchers and professionals omit to do those assumptions explicitly they do it implicitly.Hedonic models have been widely used by researcher to assess the value of buildings properties. We use forecast at the moment of the transaction to underline the integration of energy efficiency value in building valuation with hedonic models. We use a US database to investigate the relationship between building energy consumption and building value. We also investigate this relationship with rent. Results suggest that the energy consumption that impacts the rent value is different from those who impact transaction price. It appears that overall energy cost impact the rent value, but not the transaction price.In conclusion, the economic sustainability assessment of an energy savings investment must take into account energy sources and future price.
Background – Photovoltaic (PV) panels are an important component of passive and positive energy b... more Background – Photovoltaic (PV) panels are an important component of passive and positive energy buildings. The value of the PV depends on the price of the electricity and on the quantity of energy produced. PV investors does not want to maximize the quantity of energy produced but the cash flow generated by the electricity produced. Electricity prices are cyclical, so is they depends on the time of the days and on the day of the year. Electricity prices are different around the globe, so are solar radiation. The optimum combination of high price and high radiation is not easy to find. The best locations to install PV panel are locations where radiation and prices combination merge together to create the maximum value. Purpose – This paper intend to present a method that integrate weather data and market price dynamic in order to find the fundamental value of distributed PV production. In a second time, we use this approach to find the fundamental value of distributed PV production a...
Les proprietaires immobiliers du canton de Vaud font tres peu appel aux subventions du Programme ... more Les proprietaires immobiliers du canton de Vaud font tres peu appel aux subventions du Programme Bâtiments qui encourage les renovations energetiques. L’etude «Analyse des barrieres a l'assainissement energetique des bâtiments dans le canton de Vaud» mandatee par le Canton de Vaud a permis d’identifier certaines causes et propose des mesures pour remedier a cet etat de fait. Parmi les facteurs pouvant expliquer le phenomene, l’etude a identifie des facteurs juridiques comme l’application du droit bail dans le canton, structurels comme le faible taux de maisons individuelles occupees en residence principale, economiques et financiers comme l’absence de soutien cantonal aux audits energetiques ou encore certains facteurs socio-culturels.
This thesis has two objectives. The first objective is to better understand the value of energy e... more This thesis has two objectives. The first objective is to better understand the value of energy efficiency in buildings and its relationship to secondary market real estate prices. The second objective is to understand the cost of the implied insurance included in fixed rate mortgage (FRM) and borne by the borrower. My observations show that most research in energy efficiency ignore or make implicit assumptions about certain parameters, energy source, future energy prices and discount rates, which may have considerable impact on the energy efficiency value. In the first chapter, I develop a tool that can estimate the value of a given energy efficient investment by taking into account these parameters, the present value of a unit of energy (PVU). The PVU fluctuates throughout time and is very sensitive to the economic scenario considered (expected regulation, expected demand, and the consequent energy price path). Then, I use this tool to test the relationship between energy efficiency and real estate prices. I find that even with evidence of the tool’s informational content and explicit assumption on parameters that should impact the value of energy efficiency, real estate prices are not following the expected relationship. This suggests that either energy efficient buildings bear a potential abnormal return investment possibility or that real estate investors use energy price forecasts that are not in line with authority’s ones. In the second chapter, this thesis investigates mortgage financing. First, I determine the implicit insurance cost of fixed rate mortgage (FRM) in comparison with adjustable-rate mortgage (ARM). In this chapter, I develop a method, based on the parameterization of previous case studies with formal assumptions, in order to compute the cost of FRM. I look at the properties of the risk hedged from the household perspective. This chapter brings forth three innovations. First, this is the first research to look at the FRM cost relative to ARM in Switzerland. Secondly, this thesis is the first research that defines and explore the risk hedged. Thirdly, I develop an alternative to the conventional interest rate spread, often used to assess the cost of FRM. In addition, I characterise the risk in terms of distribution and dependence.
Plug-In Hybrid Electric Vehicle (PHEV) Québec Test ... Program: A Major Real-World Test Study on ... more Plug-In Hybrid Electric Vehicle (PHEV) Québec Test ... Program: A Major Real-World Test Study on Financial, ... Nicolas Dehlinger, Michaël Desjardins, Maxime Dubois, Jean Longchamps, Louis Tremblay Laboratoire d'Électrotechnique, d'Électronique de Puissance et de ...
Accounting & Finance, 2013
This paper contributes to the debate on the impact of accounting measurement rules for financial ... more This paper contributes to the debate on the impact of accounting measurement rules for financial assets. We examine the association between fair value accounting for financial assets and market price volatility for nonfinancial firms in an experimental setting. One group of participants was provided with financial statements where held-for-trading securities were reported at fair market value (FVA). Another group received financial statements with investments reported at historical cost (HCA). Controlling for accounting data, we find no systematic difference between FVA and HCA for three different measures of market price volatility, despite higher earnings volatility and marginally heavier trading under FVA.
The Journal of Risk Finance, 2018
Purpose Previous studies have shown the VIX futures tend to roll-down the term structure and conv... more Purpose Previous studies have shown the VIX futures tend to roll-down the term structure and converge towards the spot as they grow closer to maturity. The purpose of this paper is to propose an approach to improve the volatility index fear factor-level (VIX-level) prediction. Design/methodology/approach First, the authors use a forward-looking technique, the Heath–Jarrow–Morton (HJM) no-arbitrage framework to capture the convergence of the futures contract towards the spot. Second, the authors use principal component analysis (PCA) to reduce dimensionality and save substantial computational time. Third, the authors validate the model with selected VIX futures maturities and test on value-at-risk (VAR) computations. Findings The authors show that the use of multiple factors has a significant impact on the simulated VIX futures distribution, as well as the computations of their VAR (gain in accuracy and computing time). This impact becomes much more compelling when analysing a portfo...
Proceedings of the 19th Annual European Real Estate Society Conference - Edinburgh, Scotland, 2012
A huge part of housing finance is related to mortgage. In Europe, loan-to-value range between 50%... more A huge part of housing finance is related to mortgage. In Europe, loan-to-value range between 50% and 85% for mortgage while the mortgage market/GDP ratio increased by 20% between 1998 and 2010. In most developed countries housing is the most important household's investment or expenditure. This investment is generally leveraged by mortgage borrowing. The mortgage can bear fixed or variable interest rate; both with their pros and cons. Fixed rate allows easier budgeting over years since the bank bear the interest rate risk. This property of fixed rate mortgage is often assimilated to insurance that hedge against monthly payment fluctuation. Usually, initial variable rate is cheaper since the interest rate risk is assumed by the borrower. Yet, there has been surprisingly little work on mortgage decisions from the perspective of the household. Instead, most research on mortgages has been conducted by real estate or fixed-income securities specialists who are interested in pricing mortgage-backed derivatives. This paper proposes a method to assess the relative cost of fixed rate mortgage implied insurance for the borrower. Thus, we link the insurance cost with insurance premium concept and the related hedged risk. The proposed method is applied to Swiss data. This method offers a sound's basis for comparison of the cost of fixed mortgage rate in time and among countries. It also allows the exploration of the relationship between fixed rates implied insurance cost and people's preference for the financial product. We use the method to analyse mortgage rate between 2002 and 2012. We compare variables rates (Libor and bank's variable rate) with five and three years fixed rate. We find that most of the time fixed implied insurance is costly for the borrower. This cost represents a value between 0.5% and 7% of the total initial mortgage when compared with Libor.