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Developers’ perspectives on timing to build: Evidence from microdata of land acquisition and development

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  • Lu, Chien-Lin
  • Liao, Wen-Chi
  • Peng, Chien-Wen

Abstract

The holding of vacant land has an option value. Existing theory reckons a linkage between the expected wait and the stochastic nature of development costs, but few empirical studies can address it due to data availability. This research merges developer characteristics with complete microdata on land acquisitions and developments of an emerging district in Taipei, and it adopts the Accelerated Failure Time model to examine the timing to build. The expected wait is longer for developers with more paid-in capital or with less development capacity. Most significantly, those involved in subsidiarization tend to shorten the wait. The results are robust under alternative specifications and consistent with the theoretical predictions of costs. Additionally, a policy incentive on the plot ratio substantially shortened the district's development process. The data have no censoring and truncation issues typically encountered in survival analysis. Further tests shed light on the severity of biases the estimation would suffer if the data had those issues.

Suggested Citation

  • Lu, Chien-Lin & Liao, Wen-Chi & Peng, Chien-Wen, 2020. "Developers’ perspectives on timing to build: Evidence from microdata of land acquisition and development," Journal of Housing Economics, Elsevier, vol. 49(C).
    • Handle: RePEc:eee:jhouse:v:49:y:2020:i:c:s1051137720300450
    DOI: 10.1016/j.jhe.2020.101709
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    More about this item

    Keywords

    Accelerated failure time; Land banking; Real option; Time to development; Urban vacant land;
    All these keywords.

    JEL classification:

    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General
    • R14 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Land Use Patterns
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets
    • R52 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Land Use and Other Regulations

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