Forecasting prices of presale houses: A real option approcach

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

Research output: Contribution to journalArticle

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 languageEnglish
Pages (from-to)143-158
Number of pages16
JournalRomanian Journal of Economic Forecasting
Volume18
Issue number1
Publication statusPublished - 2015 Jan 1

Fingerprint

Price forecasting
Investors
Real estate
Real options
World system
Tax
Premium
Closed-form solution
Margin
Simulation
Investing
Factors
Industry

All Science Journal Classification (ASJC) codes

  • Economics, Econometrics and Finance(all)

Cite this

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Forecasting prices of presale houses : A real option approcach. / Wu, Ming-Cheng; Lin, I-Cheng; Huang, Yi Ting; Chang-Rong.

In: Romanian Journal of Economic Forecasting, Vol. 18, No. 1, 01.01.2015, p. 143-158.

Research output: Contribution to journalArticle

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