Quantitative methods for risk management in the real estate development industry

摘要

Investment in real estate is based on dynamic, uncertain and complex assumptions. This is especially true for real estate development given its speculative and entrepreneurial activity. Factors such as unknown future demand, risks and uncertainty are key elements of real estate development (Byrne, 1996; Isaac etal, 2010; Schulte and Bone-Winkel, 2002). Effective risk management is thus a decisive strategic success factor. Though not always evident during periods of strong economic growth, it is undoubtedly of paramount importance during economic downturns. The global financial crisis and the deterioration in real estate markets across large parts of Europe in 2008/2009 clearly demonstrated the significance of the real estate industry for the world economy.