On the Strategic Timing of Sales by Real Estate Developers: To Wait or To Presell?

L. Li (), Helen X. H. Bao and K. W. Chau
Additional contact information
L. Li: The University of Cambridge
Helen X. H. Bao: The University of Cambridge
K. W. Chau: Ronald Coase Centre for Property Rights Research, HKUrbanLab, The University of Hong Kong

The Journal of Real Estate Finance and Economics, 2023, vol. 66, issue 1, No 6, 169-196

Abstract: Abstract In timing property listings, real estate developers can exercise the “option to wait” or “option to presell” to mitigate price uncertainty risk. In this study, we study the effectiveness of both strategies under a unified framework. We test our hypotheses using residential development data from Hong Kong between 1995 and 2015. Empirical evidence shows that when the presale option is unavailable, developers tend to adopt the waiting strategy when facing price uncertainty risk. Conversely, when a presale option is available, developers will accelerate sales when price volatility is high. Moreover, the effectiveness of the presale option depends substantially on government restrictions. Our approach facilitates the identification of the net effect of either tool and provides an opportunity to unify conflicting findings in the literature.

Keywords: Real option; Regulation; Planning; Hazard model (search for similar items in EconPapers)
JEL-codes: D81 R31 R58 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://link.springer.com/10.1007/s11146-022-09894-0 Abstract (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kap:jrefec:v:66:y:2023:i:1:d:10.1007_s11146-022-09894-0

Ordering information: This journal article can be ordered from
http://www.springer. ... ce/journal/11146/PS2

DOI: 10.1007/s11146-022-09894-0

Access Statistics for this article

The Journal of Real Estate Finance and Economics is currently edited by Steven R. Grenadier, James B. Kau and C.F. Sirmans

More articles in The Journal of Real Estate Finance and Economics from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().