On Land Price Formation: Bubble Versus Option

Abstract

This paper investigates the theory of land price formation, taking into consideration the fact that an``option'' is implicitly attached to land. Using a theoretical model, it tries to explain the land price bubbles in Japan in the late 1980s as the result of investors' expectations of alternative uses of the land. The model is estimated and validated using data on the Tokyo metropolitan residential area. The modelling exercise also determines the extent to which the option contributes to the formation of land prices. It is shown that the separation of the land price from its fundamental value can be satisfactorily explained by the option property of land. JEL Classi®cation Numbers: C53, G12, R14.

Housing market bubbles and urban resilience: Applying systems theory

“… No. Actor group Code References 1 Architect ARC ( Gaffney, 2009 ) 2 Buyer/Investor BUY ( Holtemoller & Schulz, 2010 ; Hui, Dong, Jia, & Lam, 2017 ) 3 Community-Based Organizations CBO ( Shiller, 2009 ) 4 Contractor/Builder CON ( Gaffney, 2009 ) 5 Developer DEV ( Hui et al, 2017 ) 6 Federal Government FGO ( Walks, 2014 ) 7 Financier FIN ( Roy & Kemme, 2012 ) 8 Local Government LGO ( Byrne & Norris, 2018 ) 9 Non-Governmental Organizations NGO ( Shiller, 2009 ) 10 Occupant OCC ( Arce and Lopez-Salido (2011) 11 Owner OWN ( Kanoh & Murase, 1999 ) 12 Real Estate Agent REA ( Arce & Lopez-Salido, 2011 ) 13 Researchers/Academics RES ( Jackson, 2018 ) 14 Solicitor SOL …”

“…Shocks or stressors do not undermine the system in isolation; instead, collapse often results from a combined impact of stressors and shocks ( Vaughan, 2018 ). The uncertainty on timing and severity of consequences is a significant concern for societies during a bubble ( Kanoh & Murase, 1999 ). Responses are the actions to alter the trajectory of systemic performance in the wake of shocks and stressors, some of which are based on early warning indicators and constant monitoring of systemic performance ( Mitchell & Harris, 2012 ).…”