The Impact Of Housing Price Uncertainty On Sales Decision And Transaction Price

Real estate market in China has experienced frequent and strict macroeconomicregulations and controls since2005, which makes policy uncertainty become a crucialpart of housing price uncertainty. As two substantial participators in real estate market,developers and consumers’ behavior and decision making constitute the key factors ofthe effectiveness of macroeconomic regulations and controls. The objective of thisthesis is to capture the effect of housing price uncertainty on sales decision ofdevelopers and on housing price.The thesis demonstrates the theoretical framework of real options to discuss theimpact of price uncertainty on developers’ sales decisions. Based on InformationEconomics, the thesis explores how decisions of developers and consumers impact thetransaction process and transaction price. Time-on-market is used to characterize thesales decisions of developers. Adopting the transaction samples of Beijing commodityhousing, the thesis constructs empirical studies in the following two sections. First, thethesis establishes duration models to measure the impact of price uncertainty on thehazard ratio of selling. Second, the thesis applies hedonic models to test the influence oftime-on-market on transaction price. Furthermore, the thesis investigates the differentimpacts by taking account of locational discrepancy as well as variance ofgovernment-enterprise relationship.The results of empirical studies indicate that, firstly, price uncertainty increase theselling duration, however, the delay of selling does not necessarily contribute to highertransaction price, as transaction price decreases first and then increases with the risingof time-on-market. Secondly, the impact of price uncertainty on selling duration, as wellas, the influence of sales decision on selling price all varies with locational attribute.Especially, significant effect of price uncertainty on selling behavior is found within thethird ring of Beijing, which in average, the transaction price is expected higher withinseven and a half months selling duration. Thirdly, the result suggests a significantinfluence of government-enterprise relationship on selling behaviors. Developers thatreceive government subsidy would gain higher price through deliberately defer theirselling and they experience smaller effect of uncertainty on sales process. The thesis aggrandizes the application of real option theory and also provides theoretical support tothe micro mechanisms and conduction path of how macroeconomic regulation policyinfluences housing price.