Consumption and investment values in housing price: a real options approach
Homeowners can be viewed as the put option holders who can sell housing to lenders when the housing price is lower than its mortgage value and sell houses when the housing price rises above a certain threshold. On the basis of the theory of investment under uncertainty, we model the housing value fr...
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Vilnius Gediminas Technical University
2021-05-01
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Online Access: | https://journals.vgtu.lt/index.php/IJSPM/article/view/14914 |
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doaj-8276723b432f49078dda03c6340f5e312021-09-02T08:52:41ZengVilnius Gediminas Technical UniversityInternational Journal of Strategic Property Management1648-715X1648-91792021-05-01254278–290278–29010.3846/ijspm.2021.1491414914Consumption and investment values in housing price: a real options approachChih-Hsing Hung0Shyh-Weir Tzang1Department of Money and Banking, National Kaohsiung University of Science and Technology, Kaohsiung, Taiwan, R.O.C. Department of Finance, Asia University, Taichung, Taiwan, R.O.C.Homeowners can be viewed as the put option holders who can sell housing to lenders when the housing price is lower than its mortgage value and sell houses when the housing price rises above a certain threshold. On the basis of the theory of investment under uncertainty, we model the housing value from the perspective of houseowners who can choose to either live in their houses or switch houses for comfort improvement and price appreciation. We can decompose the housing value into consumption and investment values by exploring parameters affecting housing value and decision making of houseowners. We find that the proportion of investment value to housing value increases with the volatility of the housing market, indicating the possible formation of housing bubbles. In addition, the comfort and utility provided by housing are critical for homeowners to decide whether to sell their houses. The analysis provides policymakers and market participants in the real estate market with insights into the price formation of real estate.https://journals.vgtu.lt/index.php/IJSPM/article/view/14914consumption valuehousing valueinvestment valuereal optionsutility rental benefit |
collection |
DOAJ |
language |
English |
format |
Article |
sources |
DOAJ |
author |
Chih-Hsing Hung Shyh-Weir Tzang |
spellingShingle |
Chih-Hsing Hung Shyh-Weir Tzang Consumption and investment values in housing price: a real options approach International Journal of Strategic Property Management consumption value housing value investment value real options utility rental benefit |
author_facet |
Chih-Hsing Hung Shyh-Weir Tzang |
author_sort |
Chih-Hsing Hung |
title |
Consumption and investment values in housing price: a real options approach |
title_short |
Consumption and investment values in housing price: a real options approach |
title_full |
Consumption and investment values in housing price: a real options approach |
title_fullStr |
Consumption and investment values in housing price: a real options approach |
title_full_unstemmed |
Consumption and investment values in housing price: a real options approach |
title_sort |
consumption and investment values in housing price: a real options approach |
publisher |
Vilnius Gediminas Technical University |
series |
International Journal of Strategic Property Management |
issn |
1648-715X 1648-9179 |
publishDate |
2021-05-01 |
description |
Homeowners can be viewed as the put option holders who can sell housing to lenders when the housing price is lower than its mortgage value and sell houses when the housing price rises above a certain threshold. On the basis of the theory of investment under uncertainty, we model the housing value from the perspective of houseowners who can choose to either live in their houses or switch houses for comfort improvement and price appreciation. We can decompose the housing value into consumption and investment values by exploring parameters affecting housing value and decision making of houseowners. We find that the proportion of investment value to housing value increases with the volatility of the housing market, indicating the possible formation of housing bubbles. In addition, the comfort and utility provided by housing are critical for homeowners to decide whether to sell their houses. The analysis provides policymakers and market participants in the real estate market with insights into the price formation of real estate. |
topic |
consumption value housing value investment value real options utility rental benefit |
url |
https://journals.vgtu.lt/index.php/IJSPM/article/view/14914 |
work_keys_str_mv |
AT chihhsinghung consumptionandinvestmentvaluesinhousingpricearealoptionsapproach AT shyhweirtzang consumptionandinvestmentvaluesinhousingpricearealoptionsapproach |
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1721177540831215616 |