The Valuation of Hope Value in a Vacant Land Using Real Option Theory

Maurizio d'Amato and Paola Amoruso

ERES from European Real Estate Society (ERES)

Abstract: The paper is focused on a proposed methodology to determine the hope value of a vacant land. According to European Valuation standard Hope Value is “which the market is willing to pay in the hope of a higher value use or development opportunity being achievable than is currently permitted under development control…” (EVS1). For this specific reason real option theory is proposed to appraise hope value for vacant land. It is not the first time that Real Option has been applied to valuation of improved land (Titman, 1985). A practical case in Bari will show how this procedure may be useful for hope value determination.Design/methodology/approach The approach is based on the application of real option theory, considering the vacant land as a growth optionThe paper demonstrates that real option theory can be considered an useful tool As a consequence it is possible to appraise also aspect of value that are not easy to take into account using the methodologies of valuationThe originality is in the application of a well known methodology to a valuation case included on the last version of European valuation Standards.

JEL-codes: R3 (search for similar items in EconPapers)
Date: 2016-01-01
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://eres.architexturez.net/doc/oai-eres-id-eres2016-8 (text/html)

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:arz:wpaper:eres2016_8

Access Statistics for this paper

More papers in ERES from European Real Estate Society (ERES) Contact information at EDIRC.
Bibliographic data for series maintained by Architexturez Imprints ().