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Article: What Motivates a Developer to Sell before Completion?

TitleWhat Motivates a Developer to Sell before Completion?
Authors
LI, L
KeywordsHedge real estate risk
Housing
Presale
Regulation
Issue Date2019
PublisherSpringer New York LLC. The Journal's web site is located at http://springerlink.metapress.com/openurl.asp?genre=journal&issn=0895-5638
Citation
Journal of Real Estate Finance and Economics, 2019, v. 59 n. 2, p. 209-232 How to Cite?
DOI: http://dx.doi.org/10.1007/s11146-018-9662-3
AbstractPresale, or selling before completion, is a very common phenomenon in the housing market. However, not all developers presell their units and the proportion of units presold varies over time and across projects. This study examines the factors that affect developers’ decisions to presell their units. Based on housing transaction records on over 1000 projects in Hong Kong, we found that presale has been used as a tool to hedge against future price fluctuations. Developers’ decisions to presell also depend on its effectiveness as a hedging tool, which increases with the size of the development portfolio held by a developer. When the flexibility of a presale is constrained by regulations, its effectiveness declines, thus giving a developer less incentive to presell. Contrary to industry wisdom, presale is not an important source of financing, at least for listed developers in Hong Kong.
Persistent Identifierhttp://hdl.handle.net/10722/263398
ISSN
0895-5638
2023 Impact Factor: 1.7
2023 SCImago Journal Rankings: 0.580
ISI Accession Number ID
WOS:000477053500004

 

DC FieldValueLanguage
dc.contributor.authorLI, L-
dc.date.accessioned2018-10-22T07:38:16Z-
dc.date.available2018-10-22T07:38:16Z-
dc.date.issued2019-
dc.identifier.citationJournal of Real Estate Finance and Economics, 2019, v. 59 n. 2, p. 209-232-
dc.identifier.issn0895-5638-
dc.identifier.urihttp://hdl.handle.net/10722/263398-
dc.description.abstractPresale, or selling before completion, is a very common phenomenon in the housing market. However, not all developers presell their units and the proportion of units presold varies over time and across projects. This study examines the factors that affect developers’ decisions to presell their units. Based on housing transaction records on over 1000 projects in Hong Kong, we found that presale has been used as a tool to hedge against future price fluctuations. Developers’ decisions to presell also depend on its effectiveness as a hedging tool, which increases with the size of the development portfolio held by a developer. When the flexibility of a presale is constrained by regulations, its effectiveness declines, thus giving a developer less incentive to presell. Contrary to industry wisdom, presale is not an important source of financing, at least for listed developers in Hong Kong.-
dc.languageeng-
dc.publisherSpringer New York LLC. The Journal's web site is located at http://springerlink.metapress.com/openurl.asp?genre=journal&issn=0895-5638-
dc.relation.ispartofJournal of Real Estate Finance and Economics-
dc.rightsThe final publication is available at Springer via http://dx.doi.org/10.1007/s11146-018-9662-3-
dc.rightsThis work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.-
dc.subjectHedge real estate risk-
dc.subjectHousing-
dc.subjectPresale-
dc.subjectRegulation-
dc.titleWhat Motivates a Developer to Sell before Completion?-
dc.typeArticle-
dc.description.naturepublished_or_final_version-
dc.identifier.doi10.1007/s11146-018-9662-3-
dc.identifier.scopuseid_2-s2.0-85048057154-
dc.identifier.hkuros295470-
dc.identifier.volume59-
dc.identifier.issue2-
dc.identifier.spage209-
dc.identifier.epage232-
dc.identifier.isiWOS:000477053500004-
dc.publisher.placeUnited States-
dc.identifier.issnl0895-5638-

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