Bilgi Yilmaz, Ralf Korn, A. Sevtap Selcuk-Kestel

• As a consequence of the real estate market crash after 2008, large investors invested a significant amount of wealth into single-family houses to construct a portfolio of rental dwellings, whose income is securitized in the capital. In some local housing markets, these investors own remarkable numbers of single-family houses. Furthermore, their trading activities have resulted in a new investment strategy, which exacerbates property wealth concentration and polarization. This new investment strategy and its portfolio optimization inspire curiosity about its influence on housing markets. This paper first aims to find an optimal portfolio strategy by employing an expected utility optimization from the terminal wealth, which adopts a stochastic model that includes a variety of economic states to estimate house prices. Second, it aims to analyze the effect of large investors on the housing market. The results show the investment strategies of large investors depend on the balance among economic state, maintenance cost, rental income, interest rate and investment willingness of large investors to housing and their effect depends on the state of the economy.