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This paper shows that ignoring differences in developers’ competitive strength and their bidding behavior in land auctions leads to distorted valuation of urban lands. Using the government’s land sale data in Singapore for the sample periods 1990–2011, we found that after controlling for location and space attributes, bid prices for lands are significantly influenced by heterogeneity effects of developers. The two heterogeneity measures used in our study, which are the bid spreads and historical activities in tenders, appear to have significant and positive effects on land bids. When we control for selectivity biases through winning probability of bidders and the bid scale (>10,000 square meters, and >S$50 million in value), we found that bid prices increase when bidders’ winning selectivity is considered. For large bid, bidders’ selectivity, if ignored, will lead to underestimation of the bid prices. The results affirm the hypothesis that heterogeneity in bidders and their selectivity in bidding strategies could have significant impact on the urban land valuation.
The Journal of Real Estate Finance and Economics – Springer Journals
Published: Mar 19, 2013
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