Pricing of Presale Properties with Asymmetric Information Problems

Leung, Barbara Y. P.; Hui, Eddie C.M.; Seabrooke, Bill

doi:10.1080/10835547.2007.12089768

Cited by 19 publications

(6 citation statements)

References 8 publications

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“…Z includes housing market condition variables consistent with Hui et al (2012a), Hui and Yu (2012b). If prices are anticipated to increase, buyers have an incentive to purchase early (Leung et al, 2007b) while developers have an incentive to hold inventory longer (An et al, 2013;Edelstein et al, 2012); thus, the relationship between average house prices in the area (PRICEINDEX) and TOM is uncertain. Lower interest rates (INTERESTRATE) reduce the cost of buying a house and lowers the carrying cost for the buyer during the construction period, allowing more buyers to enter the market, and may lead to shorter TOM, consistent with Kalra and Chan (1994) if the buyer's cost savings dominate the seller's; or, if the seller's cost savings dominate the buyer's, we will observe a longer TOM consistent with Li (2004).…”

Section: Methodsmentioning

confidence: 99%

“…the future. Similarly, Leung, Hui, and Seabrooke (2007b) suggest buyers have an incentive to act early in the presale process to take advantage of the current price when prices are anticipated to increase in a boom market. Ong and Koh (2000) include two house price indices in their study because of the separate but related public and private housing markets.…”

Section: Theory and Previous Researchmentioning

confidence: 99%

“…Chau, Wong, and Yiu (2007) conclude that this indicates that developers do not have an incentive to deliver low quality products despite buyers' inability to monitor construction. Meanwhile, Leung (2010) builds upon Leung et al (2007b) to consider the moral hazard problem and constructs a forward-spot index tracking model to compare prices in the Hong Kong presale and spot market, finding that presale transaction prices reflect a discount related to the interest rate at the time of presale and the length of the construction time-lag to compensate for the cost of capital incurred by the buyer within the forward contract. However, they also find evidence that presale prices can be higher than spot market prices due to hidden presale risks.…”

Section: Theory and Previous Researchmentioning

confidence: 99%

See 2 more Smart Citations

Time-on-Market in Chinese Condominium Presales

Zhou

Zahirovic‐Herbert

Gibler

2018

International Journal of Strategic Property Management

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The condominium presale market is characterized by information asymmetry between the developer and potential buyers. A condominium developer faces conflicting incentives to sell units quickly at a lower price to generate cash and sales momentum versus to hold prices high and endure longer marketing time to maximize revenues and maintain the property’s value. We examine the pattern of marketing duration for condominium units offered for presale in a large homogeneous development in Chengdu, China using a Cox proportional hazards model. Results indicate that a patient developer may extract a price premium on units. Diminishing risk to buyers is associated with shorter marketing duration. Time-on-market is also influenced by unit and building size as well as orientation. Market conditions may moderate the speed at which units are sold.

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Section: Methodsmentioning

confidence: 99%

Section: Theory and Previous Researchmentioning

confidence: 99%

Section: Theory and Previous Researchmentioning

confidence: 99%

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Time-on-Market in Chinese Condominium Presales

Zhou

Zahirovic‐Herbert

Gibler

2018

International Journal of Strategic Property Management

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“…Within econometric models, very few non-economic types of service benefits that drive buyer satisfaction are included, and these models offer only a partial explanation of homebuyers' decision process. While offplan sales are an interesting way to share risks between developers and buyers (Chan et al, 2012) and enhance developers' financial viability (Leung et al, 2007), they also offer an opportunity to deploy a marketing strategy for a property aligned with inhabitants' expectations and to improve developers' reputation.…”

Section: Towards a Classification Of Services In Housing Presalesmentioning

confidence: 99%

The role of services in homebuyers’ attitudes: A field experiment in the French off-plan housing market

Larceneux

Guiot

2019

Urban Studies

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This article investigates the effects of services proposed by private developers on buyers’ psychological attitudes in the decision-making process for off-plan purchases. We propose a new typology of services based on perceived value. We conducted a field experiment with real buyers who purchased an off-plan dwelling in France, and we measured the causal effects on developer reputation of four service intensity indexes that offer ‘visualisation’, ‘customisation’, ‘value enhancement’ and ‘interaction’ services. The results confirm the homebuyer-based typology of services and highlight the mediating roles of two types of attitudes, satisfaction with and trust in the developer, to explain the influence on developer reputation. Services designed to improve the perception of the quality of the dwelling itself (visualisation and customisation benefits) are less effective, and those intended to create a favourable purchase context (value enhancement and interactional benefits) are more influential, emphasising the benevolent role expected from developers.

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“…Their findings suggest that there is a negative relationship between idiosyncratic risk and project development and it is susceptible to the higher competitive intensity of the project (depicted by the number of surrounding projects with different developers). The reasons for presale are not only a risk-sharing between developers and buyers (Chan et al, 2012), but also an enhancement of developers’ financial viability (Leung et al, 2007). Therefore, in theory, the presale price should be sensitive to the uncertainty before spot-sale.…”

Section: Introductionmentioning

confidence: 99%

The roles of developer’s status and competitive intensity in presale pricing in a residential market: A study of the spatio-temporal model in Hangzhou, China

et al. 2015

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This study investigates the roles of developer’s status and competitive intensity in presale pricing in residential markets. The study examines various competitive factors in Hangzhou, China, within a spatial-temporal framework. These factors include competitive intensity and developer’s status, plus two independent variable groups: external attributes and project features. To overcome the shortcomings of traditional valuation methods, the estimation makes use of spatial and temporal data via three different approaches. They are the Geographically and Temporally Weighted Regressions (GTWR), Spatial Temporal Hedonic Model (STHM) and Spatial Temporal Autoregressive Model (STAR). The analysis reveals that there exists spatial and temporal dependence in the Hangzhou real estate market. Not only does this study provide new findings and a better understanding of the factors affecting presale pricing, but it also offers valuable implications about competitive intensity for policymakers and urban planners in the spatio-temporal context.

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Pricing of Presale Properties with Asymmetric Information Problems

Cited by 19 publications

References 8 publications

Time-on-Market in Chinese Condominium Presales

Time-on-Market in Chinese Condominium Presales

The role of services in homebuyers’ attitudes: A field experiment in the French off-plan housing market

The roles of developer’s status and competitive intensity in presale pricing in a residential market: A study of the spatio-temporal model in Hangzhou, China

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