Option values in the market for periurban developable land

Transcription

1 Opion values in he marke for periurban developable land Jean Cavailhès 1 Mohamed ilal 2 Pierre Wavresky 2 January 2011 Absrac We sudy wo opion values in he developable land marke in a French deparmen (he Nord): he classical one (shor-run volailiy of he land price) and a long-run one resuling from uncerain demographic change: waiing for more informaion abou migraions when populaion is flucuaing urns ino a second opion value. The findings show ha boh opion values are significan. Firs, he land price increases by % when he sandard deviaion (STD) of he land price rises by a STD. Second, an increase of one STD of he STD of he variaion in populaion beween 1982 and 1999 enails a 6% increase in he developable land price. Keywords: opion values, land marke, urban economics JEL codificaion: R1, D8 1 UMR 1041 INRA CESAER, 26 Bd Doceur Peiean, F Dion. Corresponding auhor: Jean.Cavailhès@dion.inra.fr. Tél.: Fax: UMR 1041 INRA CESAER, 26 Bd Doceur Peiean, F Dion. 1

2 1. INTRODUCTION Over he las 40 years or so France has experienced a periurbanizaion movemen (cf. Figure 1) comparable o urban sprawl or suburbanizaion in he US and more generally o he migraion owards he counryside from big ciies ha have been going on in mos developed counries. The migraion balance of periurban areas i has been +0.6 o +1.7% per annum depending on he period; by conras, migraion balance has been negaive for urban cenres since These demographic movemens are refleced by he conversion of farmland, woodland and undeveloped land o urban land uses, wheher residenial or no (e.g. indusrial and eriary aciviies, communicaion neworks) (cf. Figure 2). Developed land has been growing faser han he populaion (+2 o +3% per year) and communicaion neworks have been growing by abou 1% per year. These are irreversible conversions aking anywhere from several monhs o several years beween he ime he decision is made and he ime he developmen (housing or offices, ec.) is compleed. This engenders uncerainy as o he selling price a he end of his period. I may herefore be preferable, before implemening he irreversible decision o build, o wai unil he marke has provided enough informaion for he risk of selling a a loss o be low enough. If he decision is posponed, some flexibiliy is mainained, allowing he land owner o build a wha is hough he mos opporune ime. This flexibiliy gives rise o an opion value which, alhough his is a real marke (he land marke), is akin o opion values on he financial markes. 2,00 1,7 1,50 1,1 1,00 0,8 0,8 0,8 0,6 0,50 0,3 0,3 0,1 0,1 0,00 0,0-0,50-0,4-0,2-0,3-0,4 urban cenres periurban areas rural areas -1, o o o o o 2006 FIGURE 1. Migraion balance beween censuses ( ) Evoluion of he impermeable soils in France oal : + 1,8% by year oal : + 1,3% by year Thousands of hecares Car parks, roads, ohers buil-up areas Year old serie new serie FIGURE 2. Changes in impermeable soils in France ( ) ere we sudy he marke for developable land in a French deparmen, he Nord, and compare i wih wo oher sudy regions (he Côe d Or deparmen and a broad area around Toulouse). The economeric model is derived from urban economics. I allows for effecs of disance, populaion, inhabians income, ec. and for wo ypes of opion value. The classical opion value resuls from real-esae price volailiy, which creaes uncerainy abou he selling price when developmen is compleed and he propery will be pu on sale. Price variabiliy over he quarers 2

3 before he ransacion akes accoun of his volailiy. Figure 3 shows ha variabiliy is high: uni prices frequenly vary by ± 10% from one monh o he nex (he larges flucuaions may be due o excepional ransacions). There is also a second uncerainy relaed o he long-erm price. A household ha buys housing in a periurban commune does no know wha i will be worh when i comes o sell i or when i is inheried, generally 10, 15 or 20 years laer (he urn over is slow in France). This fuure price depends on wha demand will be a ha ime horizon. I may herefore be raional o wai for furher informaion abou he change in demand before purchasing a plo in any paricular place. The variabiliy in populaion change by commune beween censuses wihin a 10 or 15 km radius is herefore inroduced ino he model o allow for his long-erm uncerainy and for he opion value i may engender. Figure 4 shows ha, in he Nord, some zones have posiive and ohers negaive populaion growh ( ). I can also be seen ha long-erm paerns can someimes be fairly similar for neighbouring communes, while in oher insances local paerns may be more conrased. I is difficul, hen, o anicipae any change in populaion Period of srong volailiy 60 price (euros/m²) Period of weak volailiy FIGURE 3. Price per m² of developable land by ransacion dae (Nord) Regions of weak volailiy Regions of srong volailiy FIGURE 4. Populaion change by commune in he Nord ( ) The essenial daa base used in his sudy is made up of individual ransacions for developable land for residenial purposes ( observaions) or secondary or eriary aciviies (1667 observaions) beween 1989 and 2002 in he Nord. Similar esimaions are made for he oher wo sudy areas based on fewer individual daa and for a shorer period, o es wheher resuls are comparable. Afer summarizing he lieraure on real-esae marke opion values (Secion 2), we develop he economeric model (Secion 3) and he esimaion mehods (Secion 4). The resuls are se ou in Secion 5, and Secion 6 concludes. 3

4 2. TEORETICAL MODEL The lieraure Suppose an open ciy as undersood in urban economics, ha is, a ciy where cosless migraions from he res of he world make i possible o aain urban equilibrium when he uiliy of he ciy s inhabians is equal o ha of he res of he world. Space is made up of a line = ] + [ Λ, he origin of which is occupied by a poin-shaped Cenral Business Disric (CBD), where non-agriculural obs are concenraed. Two ypes of agen are in compeiion on he land marke: households, which are all idenical; and farmers, who are all idenical. The simples case of urban economics (Alonso 1964; Fuia 1989; Muh 1969) is ha of a saic model where space is homogeneous. The price of residenial land varies wih disance from he CBD. The price of farmland, R A, is consan if he land is all equally ferile (no Ricardian ren) and if he cos of ransporing agriculural commodiies is zero (no von Thünen-ype ren). On he boundary beween he ciy and agriculure, he residenial land ren is equal o he agriculural land ren. Suppose now ha agens anicipae populaion growh of he ciy in a deerminisic world. The models of Capozza and esley (1989), Brueckner (1990) and more recenly of ardie e al. (2001), Planinga and Miller (2001), and Cavailhès and Wavresky (2003) correspond o a heoreical framework of his kind. Arno and Lewis (1979) had already inroduced such a model in The price of residenial land P is equal o he capializaion of he curren residenial land ren R and of he anicipaed fuure ren, which is in urn a funcion of he populaion growh rae g. If i is he discoun rae, we ge, as Capozza and Li (1994) show: P R = i + In a deerminisic world, farmland is convered ino developable land a a dae g 2 i. such ha R P > A. i This is no so in a sochasic world where he residenial ren obeys a random process. In such a case, he developer runs he risk ha once he land will be developed is ren will be inferior o he farmland ren. For reasons of (i) uncerainy, (ii) irreversibiliy of developmen and (iii) he arrival of informaion from he marke over he course of ime, i is raional o pu off conversion unil some fuure dae, and he greaer he random price flucuaions he more disan ha dae will be (Dixi, 1989). An opion value resuls from he flexibiliy of a developable bu no ye developed land, which depends on price volailiy. Bulan e al. (2009), Capozza and esley (1990), Capozza and Li (1994; 2002), Cunningham (2006), Fisher and anemann (1990), Grovensein e al. (2010), Planinga e al. (2002) and Tenege e al. (1999), among ohers (see oher references in Grovensein e al., 2010) sudy he workings of he land marke under such circumsances. Suppose ha he land owners are risk neural. If D is he cos of servicing he land, he land owner s expeced profi Π (x) for land locaed a x and convered a dae is Π( ) = E is is i R + ( ). 0 Ae ds R x e ds De x (1) 2 Suppose ha he residenial land ren follows a Brownian process wih rend g and variance σ : R ( x, + s) = R ( x, ) + gs + σb( s), where B is a Brownian moion of rend 0 and variance 1. By parial E σ + s = inegraion of he second par of (1), recalling ha [ ( )] 0 The owner s profi is: E is { [ R ( ) + ( ) + ( )] } x g s σ s e ds R = E ( x) g i +. 2 e i i 4

5 ( ) i R x g i ( 1 e ) + E + D e. RA Π(, x) = E 2 i i i (2) The owner chooses o maximize (2). This is an opimal sopping problem where conversion occurs when a reserve value ) is reached. Planinga e al. (2002), drawing on Karlin and Taylor (1975), show ha: R (x e i ( R R = e α ), where: The opimal profi Π (x) is : α = 2 2 ( g + 2σ i) 2 σ 1/ 2 g. R Π ( x) = i The reserve value R (x) A { [ R ( x) R ( x) ] R ( x) g α α 1 } [ R ( x) R ( x) e + D e ] + 2. i i is obained by differeniaing (3) wih respec o R (x) : R ( x) = R A i αg + id +. αi Among several auhors, Planinga e al. (2002) and Cunningham (2006) use his heoreical framework o esimae he opion value of developable land. Planinga e al. (2002) esimae an economeric equaion involving populaion growh and is square (iner expecaion reproducing he pas), is variance and is square, and erms for ineracion beween hese variables and he agriculural and residenial rens. They use aggregae daa for all US counies. The resuls show ha populaion densiy raises he price of farmland and is variance. I is inerpreed as capializaion of he opion value. Cunningham (2006) uses individual daa in a couny of he U.S. Seale area. e invesigaes he wo effecs relaed o opion values: reducion in he supply of land and increase in price. e begins by esimaing he uncerainy abou price from a classical hedonic price model enabling him o obain a quarerly prediced price for various zones. e hen regresses his prediced price on he prediced price of he same zones four quarers earlier: P i = α 0 i + α1 ipi, 4 + εi and so calculaes a variance over four quarers. This variance is hen inroduced as an explanaory variable for developable land price in a new hedonic equaion. The resuls show ha uncerainy has a large effec on land reenion: he supply of developable land declines by abou 11% for an addiional sandard deviaion of uncerainy abou he real-esae price. Uncerainy also has a significan bu more modes effec on price (+ 1.6% for an addiional sandard deviaion). Opion values associaed wih long-erm risk The model presened here enhances hose we have us examined by disinguishing wo opion values. When a household consider buying a plo o build a house on, i has o expec wo prices: he price a he momen i can move in (1 2 year) and he price a he momen when he house will be sold or passed on as an inheriance (10 20 years: propery urn-over is slow in France). In addiion, he arrival of migrans presupposes public good invesmens ha are financed by he local auhoriy hrough long-erm loans. I is raional o wai for informaion abou migraory flows in order o decide on building new housing: he household pospones he decision and he mayor resrics he arrival of populaion by using a land zoning scheme. The oucome is an opion value ha is capialized in he price of plos. We deal here wih hese wo aspecs of uncerainy abou fuure prices, emphasizing he second one, because as far as we know i has never been considered in he lieraure. Wheher i is a maer of he household reselling he housing or he scaling of municipal faciliies, we suppose ha he disance o he CBD plays he same role as ime in he classical model of opion value. The change in populaion dn of commune for an incremen in disance dx (equivalen o he ime incremen d ) follows a rend, upon which random oscillaions are superimposed. I is probable ha he variance of hese oscillaions increases wih disance, because i depends on many facors, which are increasingly uncerain as (3) 5

6 disance o he CBD increases: ranspor coss, fuure echnical improvemens o cars, axes o correc marke failures (climae change, polluion), ranspor nework developmen, working from home, ec. These assumpions lead us o chose o wrie a Brownian geomerical moion: dn n dx n dx and = α + σ ε, where α is he rend σε he uncerainy ( ε is a random variable wih zero mean and uni variance). Uncerainy increases wih dn / n follows Brownian moion). disance x in linear log form ( 3. ECONOMETRIC MODEL AND DATA Economeric model To model shor-erm opion values (emporary price volailiy) we look a pure price variabiliy over ime, ha is, by conrolling a se of variables X ha affec his price and vary over he course of ime (plo size, remoeness, ec.). The saring equaion is ~ dp = 1 α d + σε d, where P ~ is he change in he price of developable land over he period d under he pure influence of ime, ha is, having expurgaed facors of variaion included in X and where ε is a random variable of zero mean and of uni variance; α is he rend and σ 2 he price variance. P ~ is esimaed by a random-effecs model P i = X b + bt + υ + ε + ε, (4) i where he price P i of ransacion i in commune and in he period is explained by a se of variables X, by a coninuous ime variable T capuring he rend, by a random variable υ ha is dependen on he period preceding, a second random variable depending ob he commune and by an individual error ε i. The variance of υ, calculaed by (5), is hen inroduced ino he explanaory model of land price ˆ = l l = 12 i ( ) 2 ˆ υ ˆ υ σ, (5) where he has designae he υ values esimaed by (4) and he bar represens he mean of hese values esimaed for he 12 monhs before. σˆ has a ha because i is a sandard deviaion calculaed from esimaed values of wih: υˆ (hence he ha) and υˆ (hence he ha and he bar). The equaion o be esimaed becomes P i = X b + b ˆ The long-erm opion values are inroduced in he same way: i i i T 1 T + bσ σ + ε + εi. (6) ln P = X b + b T + b ˆ ε, (7) n = σ σ + bn n + bσ nσ n + ε w w l = 1 ( nl n) σ, where σ n is he sandard deviaion of variaion of populaion n change over ime during he period in he communes around wihin a neighbourhood w and n is he change in populaion over his period. This sandard deviaion is calculaed direcly from populaion censuses. The sandard deviaion of populaion on which households base heir decision o purchase has o be observed over a long enough period. We use he period beween he 1982 and 1999 censuses. Daa and esimaion mehods The daa are from wo sources: - The Regional ousing and Developmen Office (Office régional de l habia e de l aménagemen, ORA) for he Nord Pas-de-Calais region. This source includes all ransfers of ownership of 2 i 6

7 developable land beween 1989 and Afer working hrough he file and excluding he exreme ceniles, we have observaions, of which we selec hose for secondary or eriary aciviies or infrasrucures (3322 observaions) and hose for individual developable plos ( observaions). - Perval, a corporae source whose records are supplied by soliciors (wih variaions over ime and space), is used for he oher wo sudy areas. Afer audiing he file and leaving ou he exreme ceniles, we have for he years 2000, 2002, 2004 and 2006 some 2398 observaions for developable land in he Côe d Or and observaions in he Toulouse area. The ransacions were georeferenced from plo idenifiers in he land regisry (which someimes had o be recoded o be of use) by maching hem up wih he geographical coordinaes of he cenroids of he land regisry plos, exraced by geomaic or manual processing from he land regisry files. As no all he observaions could be georeferenced, he sample used for he esimaions was composed of ransfers of ownership of developable land and 1667 ransfers of ownership of land for secondary and eriary aciviies (ORA, Nord), of 2022 developable plos in Côe d Or and 5276 in he Toulouse area. The ransacion price, which is he dependen variable, is inroduced in log form (a Box-Cox ransformaion a an earlier sage shows ha he ransformaion parameer λ is close o 0). The plo area is inroduced in polyomized form (weniles or deciles). Locaion variables were inroduced ino he equaions in linear form, if significan a he 5% level: inclusion in basins and urban areas ii, disance by road beween communes (in kilomeres using a INRA-CESAER Odomarix applicaion), disance as he crow flies beween he plo and he cenre of he village or own of he commune i belongs o. Demographic variables are also used: populaion and changes in populaion of he commune, income of he inhabians of he commune and someimes of neighbouring communes. Finally, oher shif variables were inroduced, such as he presence of land zoning schemes (PLU). The decomposiion of he error in (7) can resul in spaial auocorrelaion of he corresponding random variables. We examined hese auocorrelaions among he random variables for he communes and among he individual error erms, by esing he significance of he Moran index (compued for a neighbourhood W defined by a 5 km radius wih weighing by he inverse of disance from own hall o own hall of he communes). When i is significan, spaial auocorrelaion is correced for by inroducing a erm Wεˆ, where εˆ is esimaed in a firs sage of (7). We hen verify, by esing he significance of he Moran s index of he new values of he ' commune random variable, ε, ha auocorrelaions among neighbouring communes are no longer significan. The approach is idenical for linkages among individual error erms. Georeferencing of ransacions means neighbours can be idenified (we use a 200 m radius) and a Moran index calculaed (weighed by he inverse of disance) o es wheher i is null. If a value is significanly differen from zero, a second correcion is made o he equaion (7). iii 4. RESULTS Developable land for housing in he Nord Table 1 shows he resuls for plos for individual houses in he Nord (he surface area weniles are no lised). We shall commen briefly on he values of mos of he parameers of he fixed facor of he equaion o emphasize more he effecs of spaial variabiliy of he populaion and ime variabiliy of he land price. The price of developable land increases by almos 10% when he populaion of he commune and he adoining communes rises by 1000 inhabians. The income of he household of he commune and he adoining communes has a significan effec: price rises by 3.8% when income rises by 1000, which is consisen wih he classical mechanism of capializaion of neighbourhood exernaliies. The populaion change in he basin cenre beween 1982 and 1999 also influences price, as does disance from ha cenre which also acs as expeced: price falls by 1% for each kilomere furher away he plo is. The disance of he plo from he own hall also has an effec, excep for communes wih fewer han 1000 inhabians: he fall in price is beween 7 and 13% depending on commune populaion. [Inser here TABLE 1] Shor-erm marke volailiy and long-erm populaion variabiliy give rise o significan opion values. We esed sandard deviaions for lags of 4, 6 and 10 quarers and differen permuaions for sandard deviaions of populaion (10 or 15 km, beween or censuses), which lead o parameers ha are all posiive and significan (we seleced he mos significan one in each insance). We also disinguish variabiliy of 7

8 prices according o he phases of downurn ( ) and upurn ( ) in he real esae cycle (cf. Figure 3), o allow for he fac ha uncerainy abou he fuure does no operae in he same way hroughou he cycle (Mad and Pindyck, 1987). A variaion of one sandard deviaion (STD) of he sandard deviaion of he plo price wihin he six quarers before a ransacion enails a price increase of 7.4% during he downurn of he real-esae cycle and of 15.3% during he upurn period. The value of hese STD is of 0.7 (downurn period) and of 1.3 (upurn period) and he STD of hese STD are 0.8 and 1.7, respecively. Variabiliy is herefore high compared wih he value of he STD hemselves. The opion value due o shor-erm volailiy of he marke for a STD of he STD price is 6% and 26% of he plo price during each of he periods respecively (= 7.4% * 0.8 and 15.3% * 1.7). The spaial variabiliy of populaion change also has significan effecs. During he period of downurn of real-esae prices ( ), he parameer obained is negaive. The inerpreaion of real-esae opion values in a downurn period seems difficul from he sandpoin of heory. We herefore se lile sore by his resul. During he upurn period ( ), he parameer is significanly posiive. An increase of one STD (0.36) of he STD of populaion growh (mean value 0.22) works ou as a 6% rise in plo price. Over his period, he longerm opion value for a STD of he STD populaion change is herefore 1.3% of he plo price (= 6% * 0.22). Developable land for Nord s secondary or eriary aciviies Table 2 shows he resuls for developable land for secondary or eriary aciviies in he Nord. The change in he commune populaion is refleced by an increase in land price, wih an elasiciy of When he mean income of households in he commune rises by 1000, he plo price rises by 2.5%. The presence of a zoning scheme enails a price rise of 27%. Accessibiliy is refleced by a 1.7% fall in price per kilomere for disance from he basin cenre and a 1.4% fall per kilomere for disance from he neares moorway uncion. The disance beween he plo and he own hall of he commune affecs he price of hese plos, excep for communes of less han 1000 inhabians. The fall in price depends on he commune s populaion, ranging from 6.2 and 11% per kilomere. [inser here TABLE 2] Plos for secondary and eriary aciviies or for infrasrucures do no give rise o opion values relaed o shor-erm variabiliy of he land price. This may be because he seller canno choose he dae he propery is pu on he marke. For land for economic aciviies or public-secor developmen, he purchaser (a public agen in many cases) can impose he ransfer dae, someimes by hreaening expropriaion if public uiliy can be invoked. For here o be an opion value, he owner of he plo mus be free o choose he momen o make a sale. The small number of observaions for calculaing quarerly sandard deviaions may also have an effec: here are 63 on average and someimes half as many for some quarers. The opion value resuling from variabiliy in he change of populaion is esed by inroducing he STD of populaion change in he 10 adoining communes beween 1982 and 1990, which is he mos significan variable. I is included in he regression by disinguishing wo sub-periods, and During he firs period, his variable is insignifican (i is slighly negaive) whereas in he upurn period i resuls in a significan rise in land values: when he STD of populaion growh increases by a STD, he price of land for secondary and eriary aciviies or infrasrucure rises by 4.4%. This is consisen wih our hypohesis, bu seems o conradic he lack of shor-erm influence of price: if he seller has no conrol over he momen of selling, here should be no opion value in any case, and she can choose he dae here should be an opion value in boh cases. Comparisons wih he Côe d Or and he Toulouse area The resuls for he Toulouse area and he Côe d Or are shown in Table 3. [Inser here TABLE 3] 8

9 The slope of land values wih disance from cenres is differen in he hree sudy regions. In he Toulouse area, i is 1.2%/km from he neares basin cenre and 1.6%/km from Toulouse. In he Côe d Or, he values are respecively 2.9%/km and 1.2%/km from Dion. In he Nord, he slope is only 1.0%/km from he basin cenre. The hierarchy of resuls is fairly consisen. The Nord is a deparmen wih many urban cenres, where he populaion is dense and he urban grid is close-kni (43 basins). Accordingly a plo of developable land is invariably close o an urban and/or basin cenre. Quie he reverse, he Côe d Or is a deparmen where Dion is he only sizeable ciy and where he urban grid is very loose (18 basins). This means ha he effec of disance from Dion is fel up o he boundaries of he deparmen and is paricularly srong in he Dion urban area. Neverheless, i is a medium-sized ciy (150,000 inhabians), where he road and public ranspor neworks are no as developed as in he much larger ciy of Toulouse. The Toulouse area is beer serviced by public ranspor and beer cover by fas access roads han he Dion region. This is logical enough in a ciy of his size (445,000 inhabians in Toulouse iself, 1.1 million in is urban area). Consequenly, he slope of land values according o disance from Toulouse is smaller han he equivalen from Dion, which probably reflecs he qualiy of he Toulouse meropolian ranspor nework. In all hree areas, here is also an accessibiliy gradien on commune scale: prices fall wih disance from he own hall, which is generally locaed in he village or own cenre, where public-secor aciviies and he supply of privae goods and services are concenraed. This effec is sligh (Côe d Or) or non-exisen (Nord and Toulouse) in communes of fewer han 1000 inhabians, probably because such public or privae goods are no abundan in hese small communes. The effec is fel in more populous communes. In he Toulouse area, prices fall by 4 o 8% per kilomere wih disance from he own hall (depending on commune size). This slope is lower han ha in he Nord ( 5 o 12%/km, depending on commune size) and above all in he Côe d Or ( 36%/km for communes of more han 1000 inhabians). The slope is herefore seeper where selemen is clusered (Côe d Or), which reflecs a concenraion of public services (schools, ec.) and shops in he cenre of hese marke owns. The fall in land values wih disance from he commune cenre is no as sharp in he Toulouse area, where he disance o ravel o school or o he shops seems o be offse by oher advanages (large residenial plos for building swimming pools, barbecues, ec.). The Côe d Or allows a more precise analysis of urban zoning effecs han he wo oher sudy regions. The local zoning schemes (plans locaux d urbanisme, PLU) have been digiized, which, wih he geolocaion of plos, means we can deermine which PLU zone hey are locaed in. The plos belonging o communes wihou zoning schemes are he reference. Where here is a zoning scheme, plos wihin a farmland or undeveloped zone are respecively 32% and 42% less expensive han he reference, whereas in a developable zone hey are 35% more expensive. The exisence of a zoning scheme herefore enails sharp umps in price depending on he zone. I has no been possible o inroduce he shor-erm price volailiy opion value ino equaions for wan of sufficienly long ime series in he Toulouse area and he Côe d Or. Besides, we have only 2022 exploiable observaions for he Côe d Or. In he Toulouse area, long-erm opion values engendered by he spaial variabiliy of populaion change can be esimaed from lower numbers han in he Nord, bu he numbers are sufficien for he resuls o be robus. In he Toulouse area, he differen sandard deviaions of populaion ha we esed are all significan. We selec he change in he 15 neares communes, which displays an imporan effec. A one STD increase (0.48) of he STD of he populaion change (herefore he mean value is 1.2) is refleced by a 5.6% increase in plo price. The opion value due o his change represens 2.7% of plo price (5.6*0.48). In Côe d Or, he variabiliy of populaion change in he 10 or 15 neares communes for he periods , and , has insignifican effec on he price of developable land: he Suden s -es is close o 1.5 a bes. 5. CONCLUSIONS We have concenraed in his paper on he land capializaion of opion values relaed o uncerainy, which modifies he behaviour of sellers when he ransacion involves an irreversible facor, such as developmen. Such uncerainy may bear on he change in price over ime or on he change in populaion in space. The analysis was conduced for he Nord and comparisons made wih he Toulouse area (exending beyond he urban area of Toulouse) and he Côe d Or. The quesion of he role of disance and of accessibiliy o urban cenres in he formaion of land values has also been examined on differen scales: from he regional meropolis, from he closes marke own, from he own hall of he commune. The resuls for opion values are conrased. The inclusion in he plo price of opion values arising from marke risk, ha is, from price volailiy over ime, has been esimaed for he Nord, where i is significan. This confirms he conclusions of work for oher counries. The effecs of spaial variabiliy of populaion change on 9

10 land values have been analysed in he hree sudy areas. The resuls show ha, in some cases, he effecs are insignifican. This may be, obviously, because of he inaccuracy of he heoreical hypohesis, bu also because of oo few observaions (Côe d Or) or because he hypoheses of he heory do no hold up for some marke segmens. This is he case in he Nord for plos for economic aciviies or infrasrucures : he purchaser can impose he sale a he righ ime for her by invoking he public uiliy of he operaion and herefore brandish he hrea of expropriaion. For developable land for deached housing in he Nord and he Toulouse area, he resuls show ha he price of goods is significanly higher when he change in populaion in he adoining communes is volaile, and so difficul o predic. The opion value associaed wih such volailiy is low: from 1.3 o 2.7% of he plo price. I can be concluded ha more work of he kind is required o gain a beer undersanding of why he resuls are insignifican in some cases bu are in ohers and why heir level of significance in he Nord and he Toulouse area canno be a maer of pure chance: here does seem o be long-erm risk, relaed o he difficuly of predicing he change in populaion and herefore in predicing demand a a ime horizon of en years or more. In his case, his risk, which is local, is insurable by financial insiuions. Acknowledgmens This research was suppored by he Minisère in charge of own planning and public faciliies (minisère en charge de l Urbanisme, de l abia e de la Consrucion, Convenion /11/2006. I uses daa on realesae ransacions from he PERVAL Corporaion and on he land marke from he SCAFR-Terres d Europe. 10

11 REFERENCES Alonso, W Locaion and Land Use. Cambridge, MA: arvard Universiy Press. Arno, R.J., Lewis, F.D The ransiion of land o urban use, Journal of Poliical Economy 87, Bulan, L.T., Mayer, C., Somerville, C.T Irreversible invesmen, real opions, and compeiion: evidence from real esae developmen, Journal of Urban Economics, 65, Brueckner, J.K Growh conrols and land values in an open ciy, Land Economics, 66 (3), Capozza, D., Li, Y The inensiy and iming of invesmen: he case of land, American Economic Review, 84 (4), Capozza, D.R., elsley, R.W The sochasic ciy, Journal of Urban Economics, The fundamenals of land prices and urban growh, Journal of Urban Economics, 26, Cavailhès, J., Wavresky, P Urban influences on periurban farmland prices, European Review of Agriculural Economics, 30, Colwell, P. F., Munneke,. J The srucure of urban land prices, Journal of Urban Economics 41, Cunningham, C.R ouse price uncerainy, iming of developmen, and vacan land prices: evidence from real opions in Seale, Journal of Urban Economics, 59, Dixi, A.K Enry and exi decisions under uncerainy, Journal of Poliical Economy, 97(3), Dixi, A.K., and R.S. Pindyck Invesmen Under Uncerainy. Princeon, N.J.: Princeon Universiy Press. Fisher, A.C., and W.M. anemann Opion value: heory and measuremen, European Review of Agriculural Economics, 17, Fuia, M Urban Economic Theory. Land Use and Ciy Size. Cambridge: Cambridge Universiy Press. Grovensein, R.A., J.B. Kau, and.j. Munneke Developmen value: a real opions approach using empirical daa, Journal of Real Esae Finance and Economics, DOI /s Leca, G Analyse économique de la planificaion urbaine (Urban land planning economics). Ph.D. disseraion, Dion: Universiy of Burgundy and INRA. Mad, S., and R.S. Pindyck Time o build, opion value, and invesmen decisions, Journal of Financial Economics, 18, Muh, R Ciies and ousing. Chicago: Universiy of Chicago Press. Planinga, A.J., R.N. Lubowski and R.N. Savins Effecs of poenial land developmen on agriculural land prices, Journal of Urban Economics, 52, Planinga, A.J., and D.J. Miller Agriculural land values and he value of righ o fuure land developmen, Land Economics, 77, i Periurban areas are defined by he French Insiu Naional de la Saisique e des Eudes Economiques (INSEE) as having leapfrogging or non-coniguous buil areas (a mixure of residenial land, farmland and woodland) and more han 40% of he residens commuing o urban areas, where buil areas are coninuous and where here are more han 5000 obs. ii Basins are marke owns or ciies areas where ordinary goods and services are purchased and ha have basic public faciliies. Urban areas are zones wihin which people commue o cenres of employmen wih more han 5000 obs. These zones are deermined by France s saisics office (Insiu naional de la saisique e éudes économiques, INSEE). iii This could no be done for individual developable plos in he Nord as he compuer had insufficien memory o process he large number of daa. owever, i was done for plos for secondary or eriary aciviies in he Nord and for all plos in he Côe d Or and Toulouse sudy areas. 11

12 Before correcion of Afer correcion of spaial spaial auocorrelaions auocorrelaions (commune level) (commune level) Suden Suden parameer parameer Inercep populaion of he commune and adoining communes (1999, logarihm) Evoluion of he populaion of he basin cenre ( ) disance from he basin cenre (kilomeres) disance o he highway on ramp Mean income or he inhabians on he commune and adoining communes (1999, housands of euros) Land zoning scheme in he commune absence of zoning scheme in he commune Reference Reference disance from he commune cenre according o he populaion: less han 1000 inhabians o 2000 inhabians o 5000 inhabians o inhabians o inhabians more han inhabians year of ransacion sandard deviaion of he developable land price during he 6 previous quarers: period period sandard deviaion of he populaion evoluion ( ) in he commune and he 10 neares communes: period period rho (spaial auocorrelaion, commune level) Non-repored: weniles of surface TABLE Erreur! Documen principal seulemen.. Resuls: developable plos for single-deached houses (Nord) 12

13 Before correcion of spaial auocorrelaions (commune level) parameer Suden Afer correcion of spaial auocorrelaions (commune level) parameer Suden Inercep populaion of he commune (1999, logarihm) , disance from he basin cenre (kilomeres) disance o he highway on ramp Mean income or he inhabians on he commune (1999, housands of euros) Land zoning scheme in he commune absence of zoning scheme in he commune Reference Reference disance from he commune cenre according o he populaion: less han 1000 inhabians o 2000 inhabians o 5000 inhabians o inhabians o inhabians more han inhabians sandard deviaion of he developable land price during he 6 previous quarers: sandard deviaion of he populaion evoluion ( ) in he commune and he 10 neares communes: period period rho (spaial auocorrelaion, commune level) 0, ,8 Non-repored: weniles of surface TABLE Erreur! Documen principal seulemen.. Resuls: developable land for secondary or eriary aciviies (Nord) 13

14 Toulouse region Côe d'or deparmen Before correcion of Afer correcion of Afer correcion of Before correcion of Afer correcion of spaial spaial spaial spaial spaial auocorrelaions auocorrelaions auocorrelaions auocorrelaions auocorrelaions (commune level) (commune level) (commune and (commune level) (individual level) parameer Suden Suden Suden Suden Suden parameer parameer parameer parameer disance from he urban area cenre (kilomeres) disance o he highway on ramp disance o he neares basin cenre populaion of he basin cenre (1999, housand) Evoluion of he populaion of he basin cenre ( ) populaion of he commune or/and adoining communes (1999) Mean income or he inhabians on he commune or/and adoining communes (1999, housands of euros) Land zoning scheme in he commune absence of zoning scheme in he commune disance from he commune cenre according o he Reference Reference Reference Réf. Réf. populaion: less han 1000 inhabians o 2000 inhabians o 5000 inhabians o inhabians o inhabians more han inhabians presence of a srucure on he parcel presence of a small srucure on he parcel zones of he land scheme A zone (agriculure) N zone (naure) U zone (developable) oher zones sandard deviaion of he populaion evoluion ( ) in he commune and he 15 neares communes: rho (spaial auocorrelaion, commune level) rho (spaial auocorrelaion, individual level) TABLE Erreur! Documen principal seulemen.. Resuls: developable land, Toulouse area and Côe d Or 14