Research On Real Estate Land Development And Land Transactions Based On Option Theory

The real estate land development is not reversible,uncertainty,can be delayed and flexible operating. Because of these characteristics,the traditional investment decision methods is obviously defective used in the real estate land development decision. Option theory considers the project uncertainty and flexibility well,allowing developers to choose the best investment opportunity and the greater value,so as to provide a new way to accurately assess the value of land. Firstly,this paper analyze the characteristics of real estate land development, point out the limitations of traditional methods in the real estate land development decision, introduce the real option theory and its application in practice. By analyzing of the problems of the land market,this paper discusses the feasibility of option theory used in the real estate land development,then with the option pricing model and cases, makes a quantification analyze to the decision of land reserves and development. Finally,the future establishment of land options market has been discussed. In this paper, we set up the land option pricing model,regarding the land development as an American call option,to measure the value of the land and projects in a new view,to help to the formation of the fair land market prices. Land options market will be conducive to eliminate land speculation, reduce the risk of real estate investment.