Land acquisition outcome, developer risk attitude and land development timing

Abstract

Based on the matched date of initial vacant land parcels and final completed housing projects in Beijing of China from 2003 to 2015, we investigate the correlations of land acquisition outcomes, developer risk attitude and land development timing. We find that real estate developers’ land acquisition gains or losses relative to a referential land acquisition cost have significant impacts on their decisions of land development timing. Developers will postpone the land development process after prior losses in the land acquisition stage. By introducing behavioral economics into the real option model of land development, we explain this relationship from the perspective of varying risk attitude of real estate developers.