Forecasting prices of presale houses: A real option approcach

Ming Cheng Wu; I. Cheng Lin; Yi Ting Huang; Chang-Rong

Forecasting prices of presale houses: A real option approcach

Ming Cheng Wu, I. Cheng Lin, Yi Ting Huang, Chang-Rong

Department of Finance

Research output: Contribution to journal › Article › peer-review

1 Citation (Scopus)

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.

Original language	English
Pages (from-to)	143-158
Number of pages	16
Journal	Romanian Journal of Economic Forecasting
Volume	18
Issue number	1
Publication status	Published - 2015 Jan 1

All Science Journal Classification (ASJC) codes

Economics, Econometrics and Finance(all)

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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.",

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