IDEAS home Printed from https://ideas.repec.org/a/taf/repsxx/v8y2020i1p65-81.html
   My bibliography  Save this article

Housing price dispersion in the presale market

Author

Listed:
  • Siu Kei Wong
  • Ka Shing Cheung

Abstract

Sale before completion (i.e. presale) is a common practice that real estate developers use to sell residential units. Since presale buyers are unable to inspect uncompleted units, developers may take advantage of asymmetric information and release information about quality to the market selectively. The search theory also suggests that incomplete pricing information, especially for new products, will induce a less competitive market that is characterised by dispersed presale prices. Would price dispersion be reduced if developers were required to provide more quality and pricing information? In this study, we argue that this is not necessarily the case. We conduct a natural experiment using a new information disclosure ordinance governing first-hand residential sales in the Hong Kong SAR, China. We find that the ordinance reduced the price dispersion of presale units with asymmetric information about property quality, but increased their price dispersion when limited pricing information (e.g. thin trading volume) was available in the neighbourhood. As a critical test, we further show that the ordinance increased price dispersion even more after the units were completed. This suggests that the ordinance has indeed made presale pricing more difficult because developers are no longer allowed to use different strategies to test market demand.

Suggested Citation

  • Siu Kei Wong & Ka Shing Cheung, 2020. "Housing price dispersion in the presale market," Economic and Political Studies, Taylor & Francis Journals, vol. 8(1), pages 65-81, January.
    • Handle: RePEc:taf:repsxx:v:8:y:2020:i:1:p:65-81
    DOI: 10.1080/20954816.2019.1690267
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/20954816.2019.1690267
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/20954816.2019.1690267?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Wei-Ling Tsou & Chen-Yi Sun, 2021. "Consumers’ Choice between Real Estate Investment and Consumption: A Case Study in Taiwan," Sustainability, MDPI, vol. 13(21), pages 1-13, October.
    2. Quan Gan & Maggie Rong Hu & Wayne Xinwei Wan, 2022. "Contract rescission in the real estate presale market," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 50(4), pages 1054-1106, December.
    3. Deng, Kuang Kuang & Wong, Siu Kei & Cheung, Ka Shing & Tse, Kwok Sang, 2022. "Do real estate investors trade on momentum?," The North American Journal of Economics and Finance, Elsevier, vol. 62(C).

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:repsxx:v:8:y:2020:i:1:p:65-81. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/reps .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.