An Uber for apartments could solve some common housing problems

Sharam, Andrea & Bryant, Lyndall (2015) An Uber for apartments could solve some common housing problems. The Conversation.

View at publisher (open access)

Abstract

Speculative property developers, criticised for building dog boxes and the slums of tomorrow, are generally hated by urban planners and the public alike. But the doors of state governments are seemingly always open to developers and their lobbyists.

Politicians find it hard to say no to the demands of the development industry for concessions because of the contribution housing construction makes to the economic bottom line and because there is a need for well located housing. New supply is also seen as a solution to declining housing affordability.

Classical economic theory however is too simplistic for housing supply. Instead, an offshoot of Game Theory - Market Design – not only offers greater insight into apartment supply but also can simultaneously address price, design and quality issues.

New research reveals the most significant risk in residential development is settlement risk – when buyers fail to proceed with their purchase despite there being a pre-sale contract. At the point of settlement, the developer has expended all the project funds only to see forecast revenue evaporate. While new buyers may be found, this process is likely to strip the profitability out of the project. As the global financial crisis exposed, buyers are inclined to walk if property values slide.

This settlement problem reflects a poor legal mechanism (the pre-sale contract), and a lack of incentive for truthfulness. A second problem is the search costs of finding buyers. At around 10% of project costs, pre-sales are more expensive to developers than finance. This is where Market Design comes in.

Impact and interest:

Citation counts are sourced monthly from Scopus and Web of Science® citation databases.

These databases contain citations from different subsets of available publications and different time periods and thus the citation count from each is usually different. Some works are not in either database and no count is displayed. Scopus includes citations from articles published in 1996 onwards, and Web of Science® generally from 1980 onwards.

Citations counts from the Google Scholar™ indexing service can be viewed at the linked Google Scholar™ search.

ID Code: 87038
Item Type: Journal Article
Refereed: No
Keywords: Apartments, Medium density housing, Housing affordability, Smart housing market, Market design
Subjects: Australian and New Zealand Standard Research Classification > BUILT ENVIRONMENT AND DESIGN (120000) > URBAN AND REGIONAL PLANNING (120500) > Urban Analysis and Development (120507)
Australian and New Zealand Standard Research Classification > COMMERCE MANAGEMENT TOURISM AND SERVICES (150000) > COMMERCIAL SERVICES (150400) > Real Estate and Valuation Services (150403)
Divisions: Current > Schools > School of Civil Engineering & Built Environment
Current > QUT Faculties and Divisions > Science & Engineering Faculty
Deposited On: 31 Aug 2015 02:24
Last Modified: 01 Sep 2015 00:01

Export: EndNote | Dublin Core | BibTeX

Repository Staff Only: item control page