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Article
Publication date: 6 August 2019

David Kim Hin Ho, Eddie C.M. Hui, Tai Wing Ho and Satyanarain Rengarajan

This paper aims to examine the behavior of “rational” residential developers, under game theory, for their pricing strategy in a competitive environment.

Abstract

Purpose

This paper aims to examine the behavior of “rational” residential developers, under game theory, for their pricing strategy in a competitive environment.

Design/methodology/approach

Results show that residential developers cooperate implicitly for long-term benefit, leading to a slow-down in sales. Developers are motivated to deviate from cooperating at the beginning and at the end of successive periods in a sub-market. Relatively high profits, earnable in the first few periods, provide an allowance to undercut prices and improve sales. For the last few periods, the punishment for any deviation from cooperating is insignificant or zero. Note that the first-mover advantage in a new market is evident. On the effect of uncertainty on the developer’s residential prices, results show that as uncertainty increases, prices decrease while price variability increases.

Research limitations/implications

This study highlights the merits of a uniquely simplified experimental research design for the strategic behavioral pricing of the private residential development market using a game theoretic approach.

Practical implications

This study enhances the understanding of the residential development strategy of developers in the residential development market.

Originality/value

There is limited research on pricing strategy for the private residential development market in Asia.

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Article
Publication date: 29 July 2014

Kim Hin David Ho, Satyanarain Rengarajan and John Glascock

The purpose of this paper is to examine the structure and dynamics of Singapore's Central Area office market. A long-run equilibrium relationship is tested and a short-run…

Abstract

Purpose

The purpose of this paper is to examine the structure and dynamics of Singapore's Central Area office market. A long-run equilibrium relationship is tested and a short-run adjustment error correction model are estimated, incorporating appropriate serial error correction. The long-run equation is estimated for office rent, with office employment and available stock.

Design/methodology/approach

With the vector error correction model (VECM), the lagged rent, available stock, office employment, vacancy and occupied stock (OS) can impact the rental adjustment process. Equilibrium rent on the whole reacts positively to lagged rents, available stock, office employment, OS and negatively to vacancy rates (VC). Past levels of positive change in VC and rental growth can have negative effects on current OS.

Findings

While good economic conditions signaled by increases in rents increase the supply of new stock (available space), higher rents and VC dampen the long-term occupied space (space absorption) in accordance with economic theory. Available stock can be forecasted by past rent and absorption levels owing to the developer's profit-driven nature.

Research limitations/implications

An understanding of the interaction between the macroeconomic variables and the Central Area office market is useful to domestic and foreign investors and developers, who then can better evaluate their decision making in commercial real estate investment and development projects.

Practical implications

It is implicit that the Singapore Central Area office market requires at least a year before any rental increase can potentially dampen the space demanded. Firms are attracted to locate there owing to agglomeration economies and they are willing to pay premium office rents in conjunction with office space intensification in the Central Area. Newly built space is positively affected by past rents. Urban Redevelopment Authority and private real estate developers should be wary of excess office sector vacancies by avoiding over supply, even though an increase in the supply of office space in the Central Area can have a positive impact on office rent in the longer term. Most of the office space development would tend to meet the demand in the long run. Rental stickiness is exemplified as rental changes are affected by lagged rent.

Social implications

Policy makers are better enabled to stabilize the office sectors of the real estate market if so required.

Originality/value

The paper adopts the VECM and validated by empirical evidence, to investigate the long-run equilibrium relationship and short-term corrections underlying the dynamics of the Singapore Central office market. Delay in the restoration of equilibrium in real estate markets is attributed to factors like lease terms and supply lags.

Details

Journal of Property Investment & Finance, vol. 32 no. 5
Type: Research Article
ISSN: 1463-578X

Keywords

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Article
Publication date: 20 September 2013

Kim Hin Ho, Satyanarain Rengarajan and Ying Han Lum

The paper has the following objectives in mind: to examine whether or not “green” developments have any significant effect on the Real Estate Investment Trust's (REIT…

Abstract

Purpose

The paper has the following objectives in mind: to examine whether or not “green” developments have any significant effect on the Real Estate Investment Trust's (REIT) operational and financial performance; to examine whether or not the effects of “green” developments on the REIT's performance is consistent across the different property types namely office, retail and residential.

Design/methodology/approach

The paper introduces two variables to measure “greenness” of REIT's. These variables include the percentage of square feet of certified properties and the average “greenness” score. Firm's size as measured by taking natural logarithm of total assets was also included as it serves as an indirect measurement of “greenness”. Other financial variables were added to control for the differences in firm's characteristics. This is meant to isolate the variation in performance variable that could be explained by the “green” variables. Following which, regressions (OLS) were estimated for each of the performance variables as measured by ROA, FFO/total revenue and ROE.

Findings

The general findings of this paper are: “Green” buildings do impact both the operational and financial performance of REITs. However, different measures of “greenness” of REIT's property portfolio will yield different set of results; the observed impacts of “green” buildings are mainly significant for both the K‐REIT and Capitamall Trust (CMT) whereas that for City Developments Limited (CDL) are insignificant; the observed effects vary across the different property types namely office, retail and residential as represented by K‐REIT, CMT and CDL. The paper provides evidence to show that “green” buildings are better options given the various benefits, as compared to their counterparts.

Practical implications

The findings of this paper should serve as a meaningful guide to look at how investments in “green” and sustainable buildings will create value for real estate investors at the REIT's level.

Originality/value

The paper offers insightful information for REIT's managers when they make decisions on the acquisition of “green” properties or retrofitting of the existing properties in their direct real estate portfolios. As such, this paper is meant to extend the body of literature on “green” buildings by investigating the significance of “green” buildings on REIT's performance.

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