EXECUTIVE  EDITORS    K. W. Chau   Ko Wang  
EDITORS    Chin-Oh Chang  Zhenming Ge  Tyler T. Yang


Volume 2, Number 1, Winter 1999


Real Estate prices and Economic Cycles

John M. Quigley

University of California, Berkeley, USA or


Real Estate Prices, Economic Cycles.



Institutional Factors and Real Estate Returns - A Cross Country Study

Hsien-hsing Liao

Associate Professor, Department of Finance, National Taiwan University, Taipei, Taiwan or The author acknowledges the financial support by the National Science by the National Science Council of Taiwan.

Jianping (J.P.) Mei

Associate Professor, Department of International Business, New York University, New York, NY 10012, USA or, tel:212-998-0354


This study provides an empirical study on the relationship between institutional factors and real estate returns. Using data from both developed and emerging market countries, our empirical results show that institutional factors do influence real estate returns and these factors may not be fully growth, a higher property return is expected in countries where the economy is more efficient and has more economic freedom. Our results support the view that the combination of "lumpiness" of real estate investment and the volatile nature of international capital flows may expose property investors to extra investment risk, which needs to be compensated. Our results also indicate that an improvement in a country's economic efficiency and economic freedom may reduce property variance risk thus enhancing property returns.


Economic Freedom index, Institutional Investors' Country Credit Ratings.



Property Taxation and the Demand for Floor Space in Japan

Miki Seko

Faculty of Economics, Keio University, 2-15-45, Mita, Minato-ku, Tokyo, 108-8345, Japan or


This is the first study applying the econometric analysis of piecewise-linear budget constraints arising from space-linked property taxation to Japanese housing data. The model employed is the classical Hausman type with convex piecewise-linear budget constraints and fixed preferences. We estimate that if spaced-linked property taxation for newly built houses is abolished, it would then eliminate a current excess tax burden per household of approximately 25,000yen.

Key words

Nonlinear budget constraints, Property taxation, Housing Demand, Floor space, Japan.



Land Use Rights, Government Land Supply, and the Pattern of Redevelopment in Shanghai

Yuming Fu

Department of Real Estate and Urban Land Economics, University of Wisconsin, 975 University Avenue, Madison, WI 53706 or mailto:ygu@bus,

Tsur Somerville

Faculty of Commerce and Business Administration, University of British Columbia or

Mengdi Gu
School of Management, Shanghai Jiatong University, Shanghai, PRC

Tongcheng Huang

School of Management, Shanghai Jiatong University, Shanghai, PRC


This paper reviews the urban redevelopment activities in Shanghai as the land market reforms were introduced. We focus on the impact of land use institutions on the spatial pattern of these activities. Sites for private real estate redevelopment were supplied by individual districts in the city. But the need for districts to pay for the resettlement of displaced residents contributed to a spatial mismatch between the supply of redevelopment sites and the market demand for commercial real estate space. Resettlement costs are highest at the high demand locations. State owned enterprises and institutions occupying land allocated by the state also engaged in real estate development. Whereas the density of private redevelopment was sensitive to the volume of commercial activities in a district, this does not appear to have been important in determining the location of the significant increase in the stock of commercial space resulting from development by local enterprises and institutions. This growth show considerable decentralization between 1993 and 1996, indicative of spatially inefficient redevelopment activities by land -rich state enterprises.



Hedonic Prices and House Numbers: The Influence of Feng Shui

Steven C. Bourassa and Vincent S. Peng

Urban and Public Affairs Program, College of Business and Public Administration, University of Louisville, KY 40292 USA or


In contemporary practice, feng shui incorporates a wide range of concepts considered to affect a person's luck. These include traditional ideas about site selection and building design, as well as newer beliefs about the "luckiness" of certain numbers. Focusing on an area with a relatively high percentage of Chinese households in Auckland, New Zealand, this paper uses hedonic price analysis to investigate whether house values are affected by lucky and unlucky numbers. Sales transactions for 1989 to 1996 are used in this analysis. The results demonstrate that lucky house numbers are capitalized into house values.


Feng shui, hedonic price model, lucky, New Zealand.



Land Development in Emerging Markets

Yuming Li

Associate Professor, Department of Finance, California State University, Fullerton, CA, 92834, Phone: (714) 278-3955,Fax: (714) 278-2161 or


One of the most important issues in emerging markets is the timing and intensity of land development decisions and how these decisions affect property values. In these markets, newly developed office space and residential units often account for a substantial proportion of the aggregated supply of similar types of developed properties. In this article I use a real option model to study the land development problem faced by a central planner. The optimal capital intensity, the value of land and the post-development rents and property values in these markets are strikingly lower than corresponding values in markets where the demand is perfectly elastic. Furthermore, the optimal capital intensity and the value of land are most sensitive to the market demand conditions in the emerging markets experiencing the fastest growth or greatest uncertainty, or at times when interest rates or construction costs are lowest.


Land value, Capital intensity, Equilibrium, Emerging markets.



An estimation of Elasticities of Consumption Demand and Investment Demand for Owner-Occupied Housing in Taiwan : A Two-Period Model

Chu-Chia Lin

Department of Economics, National Chengchi University, Taipei, Taiwan, or

Sue-Jing Lin

Department of International Trade, Lung-Hwa Institute of Technology, Taoyuan, Taiwan, or


Buying a house usually satisfies housing consumption demand and housing investment demand, simultaneously. In order to disentangle the above two types of demand, households, in this study, are separated into three subtenure groups i.e. renters, owners owning one house, and owners buying a second or more houses. Presumably, renting a house is for consumption only, while buying a second house is usually for investment purposes. Applying a two-period model and two data sets form DGBAS and from Land Bank of Taiwan, the estimated results are as follows: Firstly, the income elasticity of pure consumption demand for housing is very close to unity (1.0413). Secondly, the income elasticity for a pure investment demand is greater than one (1.2643). Finally, for a household owning only one house, the shares for consumption motive and for investment motive are 26% and 74%, respectively.


Consumption demand, investment demand, elasticity and housing, Taiwan.



Expectation and Housing Price Dynamics Following Deregulation in Korea

Chung-Ho Kim

Editorial Director, The Korean Center for Free Enterprise, Seoul, Korea or

Kyung-Hwan Kim

Professor, Department of Economics, Sogang University, CPO Box 1142, Seoul, Korea or


This paper offers an explanation for the existence of price control on new houses in Korea, which is deemed both inefficient and inequitable. This phenomenon cannot be explained by the conventional model of rent-seeking or the capture theory of regulation. Instead, it is attributable to the popular belief that the removal of the price regulation will lead to the increase in the perfect substitute for new houses. However, the paper, using a stock-adjustment model of the housing market, demonstrates that the claimed outcome cannot materialize under perfect foresight or adaptive expectation scheme of a self-fulfilling nature. But even in this case, the price increase will be a one-time event and in the long-run overall housing prices will fall below the level that would prevail if the price regulations were maintained.


Price control, self-fulfilling expectation, short-term dynamics, Korea.



Land-Supply Restrictions, Developer Stratagies and Housing Policies: The Case in Hong Kong

Neng Lai

Faculty of Business Administration, University of Macau, Macau or

Ko Wang

Department of Finance, The Chinese University of Hong Kong and Department of Finance, California State University - Fullerton or


The Hong Kong residential market is unique in several aspects: restricted land supply, high price volatility, high appreciation rate, a small group of large developers, and a huge public housing sector. Assuming that higher price appreciation and volatility can be attributed to the limited land supply, this study examines the relationships among developers' housing-supply decisions, government land-supply decisions, and public housing policies. Using data for the 1973-1997 period, our result shows that an increase in land supply by the Hong Kong. This finding indicates that it is important to examine developers' profit maximization strategies when enacting public policies related to property markets.


Land supply, land bank, public housing.




To    Volume 1, Number 1, Spring 1998

To    Volume 3, Number 1, Winter 2000