scholarly journals Managing Bubbles in the Korean Real Estate Market: A Real Options Framework

2018 ◽  
Vol 10 (8) ◽  
pp. 2875 ◽  
Author(s):  
Kyungwon Kim ◽  
Jae Song
Keyword(s):  
Real Estate ◽  
Real Options ◽  
House Price ◽  
Investment Strategy ◽  
Real Estate Market ◽  
Market Mechanism ◽  
The Real Estate ◽  
Early Exercise ◽  
Related Information ◽  
Real Options Valuation

The aim of this paper is to propose a real options framework to measure and manage bubbles in the Korean real estate market. The proposed framework carefully defines and utilizes the unique leasing mechanism in Korea, called the Jeonse system, a tentative contract for one or two years with a large amount of deposit, to represent the value of residence. Furthermore, the proposed framework applies the volatility with heteroscedasticity to improve the numerical accuracy in comparison to the traditional real options valuation model. The results of the model ultimately suggest the investment strategy that takes into account the measured bubbles in the market. Specifically, given that the Korean real estate market could be regarded as an American option, the investment strategy with early exercise completely eliminates the existing arbitrage opportunities in both long and short positions. In this context, the investment decisions based on the results of the proposed framework are expected to encourage the reflection of bubble-related information in the market, which eventually reduces the formation of bubbles via market mechanism for arbitrage elimination. In conclusion, the bubble-related information obtained from the model is expected to contribute to the stability of the real estate market by reducing the volatility of house price and quick price adjustment to new information.

scholarly journals Homeownership Rate and Other House Price Determinants Impacts on New House Prices in Colombia

2020 ◽  
pp. 35-50
Author(s):  
Hector Botello-Peñaloza
Keyword(s):  
Real Estate ◽  
House Prices ◽  
Housing Prices ◽  
House Price ◽  
Real Estate Market ◽  
The Real Estate ◽  
Homeownership Rate ◽  
Colombian Government ◽  
Price Determinants ◽  
Price Instability

Homeownership remains a preferred form of tenancy in different parts of the world. The attractions of security, stability, investment potential and a sense of pride outweigh the fear of price instability. For this reason, the Colombian government has encouraged in recent years, various demand policies that have sought to promote the increase in the number of homeowners. However, these ideas could have a severe impact on prices in the real estate market. Therefore, this study seeks to examine the effect of homeownership rate on new house prices in an emerging country with low real estate ownership, credit restrictions and average per capita income. The study uses panel data model to examine the influence of housing tenancy and other variables on the variation of housing prices in Colombia. Data were obtained from various sources including the Central Bank of Colombia, Financial Superintendence of Colombia, and National Administrative Department of Statistics of Colombia. The results show that homeownership rates have a positive effect on the price of new homes, which supports the hypothesis of the research. The population growth of the cities is the factor that is most relevant when explaining the price variations.

scholarly journals International Real Estate Review

2009 ◽  
Vol 12 (2) ◽  
pp. 171-192
Author(s):  
Yan Li ◽  
◽  
AHongling Guo ◽  
Yaowu Wang ◽  
Feng Wang ◽  
...  
Keyword(s):  
Control System ◽  
Information Systems ◽  
Real Estate ◽  
Warning System ◽  
Real Estate Market ◽  
Market Mechanism ◽  
Market Regulation ◽  
Continuous Increase ◽  
The Real Estate ◽  
Efficient Information

With the continuous increase of marketization and normalization in the Chinese real estate market, the market mechanism now plays an important role in market regulation. The existing macro-control system for the real estate market, however, appears to lack the ability to regulate it. Thus, an effective and efficient information-oriented tool is needed to guide the development of China’s real estate market. The research reported herein constructs a new macro-control system for this market that is based on information systems, specifically, a real estate warning system, a confidence index system, and a simulation system. This paper first presents the framework of the new information systems-based macro-control system, and its functions are analyzed. The methods of constructing the system are then discussed. Based on these methods, the index systems of the respective information systems are established, and the main models are presented. Finally, a case study that is based on survey data from the Shenzhen real estate market is described to demonstrate the applicability of the new macrocontrol system.

scholarly journals Modelagem dos Preços de Imóveis Residenciais Paulistanos

2011 ◽  
Vol 9 (2) ◽  
pp. 167
Author(s):  
Denisard Cneio de Oliveira Alves ◽  
Joe Akira Yoshino ◽  
Paula Carvalho Pereda ◽  
Carla Jucá Amrein
Keyword(s):  
Real Estate ◽  
Interest Rates ◽  
House Price ◽  
Housing Price ◽  
Real Estate Market ◽  
Hedonic Model ◽  
The Real ◽  
The Real Estate ◽  
New Findings ◽  
The Real Estate Market

Hedonic modeling has become a benchmark for pricing real assets with several intrinsic characteristics. This work tests also others dimensions for asset pricing: the quality of life in the housing neighborhood and macroeconomic variables. The data is about the real estate market in São Paulo city from January 2001 to March 2008. The main results were: the longer the maturity of mortgage financing, the larger the housing price, but decreasing interest rate spread stimulate the real estate market, and the interactions between the dummy for the boom period and either housing characteristics or bank interest rates spread show that the hedonic model loses its relative importance for pricing, while market risk variables become much more relevant. Thus, these new findings suggests that for modeling a house price index it is not sufficient to consider only average prices or a hedonic approach, but both the market and credit risks as well.

scholarly journals Value Maximizing Decisions in the Real Estate Market: Real Options Valuation Approach

2021 ◽  
Vol 14 (6) ◽  
pp. 278
Author(s):  
Andrejs Čirjevskis
Keyword(s):  
Real Estate ◽  
Global Financial Crisis ◽  
Investment Decisions ◽  
Real Estate Market ◽  
Real Estate Development ◽  
The Real ◽  
The Real Estate ◽  
Real Options Valuation ◽  
The Real Estate Market ◽  
Real Estate Project

The real estate market of EU countries has undergone a severe global financial crisis 2008–2009, recovered successfully later, and now experiencing significant uncertainty due to the COVID-19 pandemic event. Significant volatility of the real estate business is once again evident, just as it was following the global financial crisis. The paper aims to provide a case study of a real estate project by giving insight into the Latvian real estate project that had been experiencing similar economic uncertainty, to demonstrate hybrid real options valuation (ROV) method to adapt real estate investments to changing circumstances and to develop the decision-making solution to similar EU real estate problems during the pandemic. The paper provides the “step-by-step” ROV application’s methodology in real estate development projects. The presented methodology is a powerful managerial risk management tool for the executives of similar real estate development projects in the EU countries struggling to make investment decisions in the pandemic and post-pandemic period. Since any estimation includes assumptions, ROV results should be interpreted and perceived as approximations only. The future works can provide robust ROV analyses and interpretations regarding the demand for real estate, showing quantitatively how competition can impact strategic investment decisions.

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