Do Unexpected Land Auction Outcomes Bring New Information to the Real Estate Market?

28 Pages Posted: 26 Feb 2010 Last revised: 26 Dec 2012

See all articles by K.W. Chau

K.W. Chau

The University of Hong Kong - Ronald Coase Centre for Property Rights Research - Economics

Siu Kei Wong

University of Hong Kong

Edward Chung Yim Yiu

University of Auckland Business School

K. S. Maurice Tse

The University of Hong Kong - School of Economics and Finance

Frederik Pretorius

The University of Hong Kong - Department of Real Estate and Construction

Date Written: February 25, 2010

Abstract

Land and real estate are intrinsically related but generally traded in two different markets. Vacant land, being a major "raw material" for development of real estate, is traded by developers who actively manage development risk for profit. Real estate, being a long lived final product, is traded by end-users or investors for use or investment in the secondary market. This study examines price discovery between the two markets. The key question is whether land transactions, in the form of public auctions, convey any new information to the secondary real estate market. Our results suggest unexpected land auction outcomes have both market-wide and local effects on real estate prices. However, the impacts are asymmetric. We found that lower than expected land auction prices have a significant negative market-wide and local impact on real estate prices while higher than expect land auction prices have little or no impact.

Keywords: Information Flow, Market Responses, Land Auction, Price Signals

Suggested Citation

Chau, Kwong Wing and Wong, Siu Kei and Yiu, Edward Chung Yim and Tse, Maurice K. S. and Pretorius, Frederik, Do Unexpected Land Auction Outcomes Bring New Information to the Real Estate Market? (February 25, 2010). Journal of Real Estate Finance and Economics, Vol. 40, No. 4, 2010, Available at SSRN: https://ssrn.com/abstract=1559186

Kwong Wing Chau (Contact Author)

The University of Hong Kong - Ronald Coase Centre for Property Rights Research - Economics ( email )

Ronald Coase Centre for Property Rights Research
Pokfulam Road
Hong Kong
Hong Kong
(852)28592128 (Phone)
(852)25599457 (Fax)

Siu Kei Wong

University of Hong Kong ( email )

Pokfulam Road
Hong Kong, HK
China

Edward Chung Yim Yiu

University of Auckland Business School ( email )

Sir Owen G Glenn Building
12 Grafton Road
Auckland, 1024
New Zealand
+64 923 3913 (Phone)

HOME PAGE: http://https://unidirectory.auckland.ac.nz/people/profile/edward-yiu

Maurice K. S. Tse

The University of Hong Kong - School of Economics and Finance ( email )

8th Floor Kennedy Town Centre
23 Belcher's Street
Kennedy Town
Hong Kong
011-852-2857-8636 (Phone)
011-852-2548-1152 (Fax)

Frederik Pretorius

The University of Hong Kong - Department of Real Estate and Construction ( email )

Hong Kong
China

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