Pricing Relocation–Redevelopment Projects for City Expansion: The Case in China

33 Pages Posted: 17 Dec 2013

See all articles by Jiajin Chen

Jiajin Chen

CUNY Baruch College

Rose Neng Lai

University of Macau

Date Written: Winter 2013

Abstract

A solution to city expansion under limited land availability is relocation of existing habitants, demolition of existing buildings and redevelopment of new buildings. In the case of Chinese cities, however, such strategies have become a channel for municipalities to increase their revenue from sale of land and productivity from increased development, at the expense of low compensation to former occupants and vacant housing after development. We utilize a sequential real options pricing approach to find conditions when relocation/demolition and redevelopment in a finite time horizon are optimal and also to show what factors the governments can influence to delay or speed up redevelopment.

Suggested Citation

Chen, Jiajin and Lai, Rose Neng, Pricing Relocation–Redevelopment Projects for City Expansion: The Case in China (Winter 2013). Real Estate Economics, Vol. 41, Issue 4, pp. 925-957, 2013. Available at SSRN: https://ssrn.com/abstract=2368606 or http://dx.doi.org/10.1111/reec.12017

Jiajin Chen (Contact Author)

CUNY Baruch College ( email )

17 Lexington Avenue
New York, NY 10021
United States

Rose Neng Lai

University of Macau ( email )

Av. Da Universidade, Taipa
Macau, Nil
Macau

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