Stress Test On Real Estate Development Investment Based On Logistic Regression Model

The real estate industry, whose robust performance concerns the development of national economy and people’s secure life, is one of the pillar industries of our country. However, districted by its immovable and long development period nature as well as the influence of physical environment and economic and political system, real estate industry has to confront a lot of uncertainties, it’s an industry full of high risk. For a real estate investment company, risk management is an important part of its investment management and a key to success.The former researches on real estate investment risk are about price, cyclical fluctuations and the real estate bubble, and most of them are studied under normal conditions. Nowadays, affected by the global financial crisis, more and more people begin to focus on the impact of extreme movements. The unusual fluctuation of economy will increase the risk of real estate investment and force companies to go into bankrupt or even close down, and will ultimate generate depression and economic crisis. As a result, it is urgent to study the influence of critical incident. Stress test which can provide prospective information of the extreme incidents’ influence is a best method and now widely used. But it is a pity that the functions of stress test are not fully utilized and only restricted to the vulnerability of banking system.Through studies from domestic and foreign researches’ results, the thesis points out that it is necessary and feasible to carry on stress test analysis on real estate development investment. So we start to study on it. In this research, we choose Shanghai, Liaoning and Guizhou as representations after thorough consideration of the regional difference in our country’s real estate development investment:Firstly, we analyze the factors that affect the investment, and then establish Logistic regression model to evaluate real estate development investment’s risk, from the Logistic regression model we find the most important factors, then design extreme macroeconomic scenarios, finally do the test to see the results.Results displayed that:"Different regions have different significant factors. The fluctuations of real estate price, Consumer Price Index and the amount of real estate investment have much stronger impact on Shanghai, Liaoning and Guizhou respectively than other factors; when we construct extreme macroeconomic scenarios, the probability of risk increases in different degrees. So we conclude that we must fully take into account the state of the economy especially the significant factors’fluctuations to make real estate development investment more reasonable and safer.