FORECASTING PRICES OF PRESALE HOUSES: A REAL OPTION APPROACH

Ming-Cheng Wu (), I-Cheng Lin, Yi-Ting Huang and Chang-Rong
Additional contact information
Ming-Cheng Wu: Department of Finance, National Changhua University of Education, No.1, Jin-De Road, Changhua 500, Taiwan, R.O.C.
I-Cheng Lin: Department of Finance, National Changhua University of Education, No.1, Jin-De Road, Changhua 500, Taiwan, R.O.C.
Yi-Ting Huang: Taiwan Academy of Banking and Finance, No. 62, Sec. 3, Roosevelt Rd., Taipei 100, Taiwan, R.O.C.
Chang-Rong: Department of Finance, National Changhua University of Education, No.1, Jin-De Road, Changhua 500, Taiwan, R.O.C.

Journal for Economic Forecasting, 2015, issue 1, 143-158

Abstract: We are currently witnessing a boom in the real estate industry worldwide, and presale investing (or “Buying Off Plan”, as it is known in Europe) is increasingly popular. This paper conducts a pricing model based on the real option method to assess presale houses. This paper takes into account the ded uctible margins (option premium) and the tax factor to capture the most important characteristics of real-world presale system in house trading markets. This paper finally proposes a closed-form solution for the price of presale house. Simulation results and sensitivity analyses are also examined. The proposed model would help investors to predict and determine the presale house investment.

Keywords: margin; tax; real estate; house trading markets; closed-form solution (search for similar items in EconPapers)
JEL-codes: G11 G12 R32 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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