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Developer Heterogeneity and Competitive Land Bidding

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  • Zhi Dong
  • Tien Sing

Abstract

This paper shows that ignoring differences in developers’ competitive strength and their bidding behavior in land auctions leads to distorted valuation of urban lands. Using the government’s land sale data in Singapore for the sample periods 1990–2011, we found that after controlling for location and space attributes, bid prices for lands are significantly influenced by heterogeneity effects of developers. The two heterogeneity measures used in our study, which are the bid spreads and historical activities in tenders, appear to have significant and positive effects on land bids. When we control for selectivity biases through winning probability of bidders and the bid scale (>10,000 square meters, and >S$50 million in value), we found that bid prices increase when bidders’ winning selectivity is considered. For large bid, bidders’ selectivity, if ignored, will lead to underestimation of the bid prices. The results affirm the hypothesis that heterogeneity in bidders and their selectivity in bidding strategies could have significant impact on the urban land valuation. Copyright Springer Science+Business Media New York 2014

Suggested Citation

  • Zhi Dong & Tien Sing, 2014. "Developer Heterogeneity and Competitive Land Bidding," The Journal of Real Estate Finance and Economics, Springer, vol. 48(3), pages 441-466, April.
    • Handle: RePEc:kap:jrefec:v:48:y:2014:i:3:p:441-466
    DOI: 10.1007/s11146-013-9408-1
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    Cited by:

    1. Jianfu Shen & Frederik Pretorius & Xin Li, 2019. "Does Joint Bidding Reduce Competition? Evidence from Hong Kong Land Auctions," The Journal of Real Estate Finance and Economics, Springer, vol. 58(1), pages 111-132, January.
    2. Ying Fan & Charles Ka Yui Leung & Zan Yang, 2022. "Financial conditions, local competition, and local market leaders: The case of real estate developers," Pacific Economic Review, Wiley Blackwell, vol. 27(2), pages 131-193, May.
    3. Zhi Dong & Tien Foo Sing, 2021. "Do Investors Overreact for Property and Financial Service Sectors?," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 20(1), pages 79-123, April.
    4. Zhang, Yunyi & Gong, Pu, 2018. "IPV model with Cobb–Douglas and reference-dependent utility functions," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 510(C), pages 121-131.
    5. Deborah Levy & Zhi Dong & James Young, 2016. "Unintended consequences: the use of property tax valuations as guide prices in Wellington, New Zealand," Housing Studies, Taylor & Francis Journals, vol. 31(5), pages 578-597, July.
    6. N. Edward Coulson & Zhi Dong & Tien Foo Sing, 2021. "Estimating Supply Functions for Residential Real Estate Attributes," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 49(2), pages 397-432, June.
    7. Jianfu Shen & Frederik Pretorius & K. W. Chau, 2018. "Land Auctions with Budget Constraints," The Journal of Real Estate Finance and Economics, Springer, vol. 56(3), pages 443-471, April.

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    More about this item

    Keywords

    Developers’ heterogeneity; Urban land valuation; Selectivity bias; Public land sales; First-price sealed-bid auction; D44; R14;
    All these keywords.

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • R14 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Land Use Patterns

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