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Conference Paper: Housing quality in the forward contracts market

TitleHousing quality in the forward contracts market
Authors
KeywordsMarket efficiency
Moral hazard
Real estate forward sales
Reputation
Issue Date2007
PublisherSpringer New York LLC. The Journal's web site is located at http://springerlink.metapress.com/openurl.asp?genre=journal&issn=0895-5638
Citation
The 2005 NUS-HKU Symposium on Real Estate Research, Singapore, 13-15 July 2005. In Journal of Real Estate Finance and Economics, 2007, v. 34 n. 3, p. 313-325 How to Cite?
AbstractDevelopers often conduct forward sales (or presales) before building completion to relieve financial risk and burden. However, there are worries that housing units sold in this way will turn out to be substandard because developers, who have been paid for the unfinished units, may have incentives to cut costs by lowering the quality. This is a typical moral hazard problem. Nonetheless, forward sales have been very popular in some Asian cities such as Hong Kong, Singapore, and Taiwan. A plausible explanation is that the market has efficiently adjusted the forward price for this potential quality problem according to developers' reputations. This paper aims to theoretically explain and empirically test (1) whether reputation is reflected in forward prices and (2) whether the expected quality level matches with the actual quality level. Using the forward and spot sales data of the Hong Kong real estate market, we found that even though housing quality was not observable during presales, the market was able to capitalize developers' reputations into forward prices accurately. This suggests that the optimal strategy for developers is to stick to the quality level implied by their reputations. © Springer Science+Business Media, LLC 2007.
DescriptionThis journal issue is the 3rd Special Issue contained papers of the 2005 NUS-HKU Symposium on Real Estate Research
Persistent Identifierhttp://hdl.handle.net/10722/81943
ISSN
2015 Impact Factor: 0.698
2015 SCImago Journal Rankings: 1.144
ISI Accession Number ID
References

 

DC FieldValueLanguage
dc.contributor.authorChau, KWen_HK
dc.contributor.authorWong, SKen_HK
dc.contributor.authorYiu, CYen_HK
dc.date.accessioned2010-09-06T08:23:42Z-
dc.date.available2010-09-06T08:23:42Z-
dc.date.issued2007en_HK
dc.identifier.citationThe 2005 NUS-HKU Symposium on Real Estate Research, Singapore, 13-15 July 2005. In Journal of Real Estate Finance and Economics, 2007, v. 34 n. 3, p. 313-325en_HK
dc.identifier.issn0895-5638en_HK
dc.identifier.urihttp://hdl.handle.net/10722/81943-
dc.descriptionThis journal issue is the 3rd Special Issue contained papers of the 2005 NUS-HKU Symposium on Real Estate Research-
dc.description.abstractDevelopers often conduct forward sales (or presales) before building completion to relieve financial risk and burden. However, there are worries that housing units sold in this way will turn out to be substandard because developers, who have been paid for the unfinished units, may have incentives to cut costs by lowering the quality. This is a typical moral hazard problem. Nonetheless, forward sales have been very popular in some Asian cities such as Hong Kong, Singapore, and Taiwan. A plausible explanation is that the market has efficiently adjusted the forward price for this potential quality problem according to developers' reputations. This paper aims to theoretically explain and empirically test (1) whether reputation is reflected in forward prices and (2) whether the expected quality level matches with the actual quality level. Using the forward and spot sales data of the Hong Kong real estate market, we found that even though housing quality was not observable during presales, the market was able to capitalize developers' reputations into forward prices accurately. This suggests that the optimal strategy for developers is to stick to the quality level implied by their reputations. © Springer Science+Business Media, LLC 2007.en_HK
dc.languageengen_HK
dc.publisherSpringer New York LLC. The Journal's web site is located at http://springerlink.metapress.com/openurl.asp?genre=journal&issn=0895-5638en_HK
dc.relation.ispartofJournal of Real Estate Finance and Economicsen_HK
dc.subjectMarket efficiencyen_HK
dc.subjectMoral hazarden_HK
dc.subjectReal estate forward salesen_HK
dc.subjectReputationen_HK
dc.titleHousing quality in the forward contracts marketen_HK
dc.typeConference_Paperen_HK
dc.identifier.openurlhttp://library.hku.hk:4550/resserv?sid=HKU:IR&issn=0895-5638&volume=34&spage=313&epage=325&date=2007&atitle=Housing+Quality+in+the+Forward+Contracts+Marketen_HK
dc.identifier.emailChau, KW: hrrbckw@hku.hken_HK
dc.identifier.emailWong, SK: kelvin.wong@hku.hken_HK
dc.identifier.emailYiu, CY: ecyyiu@hkucc.hku.hken_HK
dc.identifier.authorityChau, KW=rp00993en_HK
dc.identifier.authorityWong, SK=rp01028en_HK
dc.identifier.authorityYiu, CY=rp01035en_HK
dc.description.naturelink_to_subscribed_fulltext-
dc.identifier.doi10.1007/s11146-007-9018-xen_HK
dc.identifier.scopuseid_2-s2.0-34248562138en_HK
dc.identifier.hkuros100542en_HK
dc.identifier.hkuros127441-
dc.relation.referenceshttp://www.scopus.com/mlt/select.url?eid=2-s2.0-34248562138&selection=ref&src=s&origin=recordpageen_HK
dc.identifier.volume34en_HK
dc.identifier.issue3en_HK
dc.identifier.spage313en_HK
dc.identifier.epage325en_HK
dc.identifier.isiWOS:000246521800003-
dc.publisher.placeUnited Statesen_HK
dc.identifier.scopusauthoridChau, KW=24830082500en_HK
dc.identifier.scopusauthoridWong, SK=7404591021en_HK
dc.identifier.scopusauthoridYiu, CY=9248825800en_HK
dc.identifier.citeulike1436102-
dc.customcontrol.immutablesml 160120 - merged-

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