Research On Real Estate Regulation Policy In The Context Of Asset Portfolio And Real Option Theory

This paper aims to review the effectiveness of China's real estate regulation policy in the context of asset portfolio and real option theory. We propose some suggestions according to the outcomes of our empirical models and the understanding of the main difficulty of the real estate market.In the demand part, we differentiate the investment demand from the housing demand and then build a portfolio of stock and investment real estate. We introduce the risk free rate and different utility curves with various risk tolerances to get an optimal portfolio under a certain risk preference. Then we change the value of parameters according to different policies and find out their impact on the real estate investment demand.In the supply part, we use real option method to find out the reason why real estate developers tend to postpone the building after they get the land and why they prefer to develop the larger and high end house.This way we can conclude that house supply should consist of two categories, high end commodity house and low end indemnificatory house. The government must participate in the low end house supply and we suggest some feasible ways to make this proposal possible.