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Based on the study of the real estate bubble of the real options theory and Implications for China

Author: WeiBin
Tutor: HuaWei
School: Fudan University
Course: Finance
Keywords: Real estate bubble Real options theory Base price Option prices Foam causes
CLC: F293.3
Type: Master's thesis
Year: 2009
Downloads: 322
Quote: 2
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Abstract

Since the financial and economic crisis began in the United States in 2007 was sweeping the globe, the Chinese real estate market due to less abroad, since 2008, housing prices in most cities across the country began to decline, the same period over the real estate market turnover also constantly shrinking. Annual national real estate land acquisition area year-on-year decrease of 8.6% in 2008, the national real estate sales decreased by 19.7% year-on-year, sales fell 19.5%. In 2009, China's real estate industry will be going, how the Government will guide and encourage real estate investment and consumption in the case of insufficient domestic demand reasonable real estate can become an important fulcrum to support the economic recovery, these problems have become the community concern and many economists and the focus of discussion. However, China's economy in order to lead the recovery, the first condition is the real estate market can have a smooth development of the stable development of the real estate market to prevent price fluctuations that prevent the emergence of the phenomenon of the real estate bubble and the bubble burst. This article based on the theory of the traditional real estate bubble, from the perspective of real options to analyze the reasons of the formation and rupture of the real estate bubble, has played an active role in reference to the Chinese government economic revitalization plan and the future of the real estate market macro-control. In order to in-depth study of the real estate bubble, it is necessary to see the essence of real estate prices, and the nature of real estate prices is again a two-tier real estate property determines. Both consumption and investment real estate, which determines the material properties \prices (asset prices) aggregates. The base price is determined by the basic social economic level to determine the basis of price, supply and demand (including demand and improved demand of the residents of the home). When residents to purchase real estate, he actually buy a call option, this option gives the right to sell the house in future prices, if future prices did not rise, residents can choose to self-occupation. This part of the options is based on physical assets is a real option and thus financial prices by the residents of this part of the real estate price trends expected in the future. Therefore, the paper argues that the price of real options in real estate prices, the base price of the real estate is determined by economic fundamentals, not obvious fluctuations, the overall upward trend in the price of an option is subject to a variety of factors, especially the residents expected impact, and therefore fluctuations Finally, will lead to overall real estate prices fluctuate greatly. Furthermore, when the economic situation improves, the residents of the future generally optimistic about the good residents are expected to lead to the option prices rising, thus the formation of price bubbles; And when the economy has been the adverse impact (such as economic or financial crisis), the residents expected to also appear in a major reversal, the option price is significantly reduced, resulting in real estate prices fell sharply, the real estate bubble burst. Residents expect prices will fall in the future, he chose not to enter the market, unless the seller is willing to reduce the price to compensate for the risk of loss of the buyers, then you showed significantly reduced prices, real estate facing the risk of bubble burst. First real options theoretically causes to the analysis of the real estate bubble, and then based on the the U.S. 1970-2007 a total of 37 years of socio-economic, and second-hand housing market data for mathematical analysis, multiple linear regression model and real options model analysis of the U.S. second-hand housing The market price of real options, and calculate the size of the option price. The model results show that, the option price component is included in the price of second-hand housing market, and this option price fluctuations, the U.S. real estate bubble and the bubble burst. Finally, the theory and the model results are used in the Chinese real estate market, and the macro-control of the future of the real estate market in China put forward constructive views. Option price will fluctuate with changes in market expectations, so the focus of government regulation is how to effectively influence market expectations, and a reasonable guide to the confusion in the market is expected to make it to the development of stable direction. How to effectively guide the market is expected to become the future focus of the government's macro-control and to prevent and bring sharp price fluctuations due to the expected disorder and significant fluctuations. The specific implementation measures, establish an effective platform for information dissemination, and improve the efficiency and credibility of the government's work.

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CLC: > Economic > Economic planning and management > Urban and municipal economy > Urban Economics and Management > The real estate economy
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