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Sale before completion of development: Pricing and strategy
Lai, R.N.1; Wang, K.2; Zhou, Y.3
2004
Conference NameConference on Commercial Property
Source PublicationREAL ESTATE ECONOMICS
Volume32
Issue2
Pages329-357
Conference DateAUG, 2003
Conference PlaceIsl Skye, SCOTLAND
PublisherBLACKWELL PUBLISHERS
Abstract

The paper examines the risk-and-return characteristics of a popular development strategy, the presale system (or sale before completion), used in many Asian cities. We model a presale decision in a real-options framework and suggest that the use of presale is primarily for a risk-sharing purpose. That is, developers can reduce bankruptcy and marketing risks by selling (or leasing) their projects before their completion dates. Our model also indicates that, because of the presale system, there is a barrier for new developers to enter into a market, which helps explain the anecdotal observation that most real estate markets in Asian cities are oligopolistic in nature and dominated by large developers.

KeywordCompound Options Redevelopment Risk Land Prices Real Assets Valuation
DOIhttp://doi.org/10.1111/j.1080-8620.2004.00094.x
Indexed BySSCI ; SSCI ; CPCI
Language英语
WOS Research AreaBusiness & Economics ; Urban Studies
WOS SubjectBusiness, Finance ; Economics ; Urban Studies
WOS IDWOS:000221701100007
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Citation statistics
Cited Times [WOS]:44   [WOS Record]     [Related Records in WOS]
Document TypeConference paper
CollectionFaculty of Business Administration
HONOURS COLLEGE
Affiliation1.Faculty of Business Administration, University of Macau, Taipa, Macau, Macau
2.Department of Finance, California Stt. University-Fullerton, Fullerton, CA, United States
3.Department of Finance, Chinese University of Hong Kong, HKSAR, Hong Kong
First Author AffilicationFaculty of Business Administration
Recommended Citation
GB/T 7714
Lai, R.N.,Wang, K.,Zhou, Y.. Sale before completion of development: Pricing and strategy[C]:BLACKWELL PUBLISHERS,2004:329-357.
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