The impact of news concerning development project launches and their take-up rates on the stock prices of publicly listed property development companies

A successful launch for a property development project has direct implications on the profitability of the development company. This paper examines the impact of news on the take-up rates in property development launches on the stock prices of publicly listed property development companies. The implications of a study on stock price reaction to news on property development launches are clear. The property company could view good market response as an opportune time for raising financing in terms of equity as well as bonds or for refinancing. More fundamentally, a favourable market response can be viewed as a market endorsement of the financing structure for property development companies where project financing is widely used. When good take-up rates are announced in the press, one expects the stock price of the development company to react positively. Empirical evidence from Singapore suggests that the cumulative average abnormal returns (CAARs) are flat on days subsequent to the announcement dates, but there exist significant movements some weeks after the condominium actual launch dates. When the launch date is used as the event date, the CAARs over the period following the launch date are positive for projects that sell well and negative for projects that do not. In addition, the cumulative returns correlate positively to the percentage of units sold over the launch period. Copyright © 2002 Henry Stewart Publications