How housing developers’ business models and accounting methods work
Economic Commentaries, News Following a long period of rising housing prices, we are now seeing increased uncertainty on the housing market in general, and especially the new build market. This leads to the need for a better understanding of the housing developers’ business model and what risks it entails. The Economic Commentary “Housing developers – how do their business model and revenue recognition work?” explains how the business model work and clarifies the methods used for revenue recognition.
Housing prices have been rising sharply for a long time. But following the price fall in autumn 2017, uncertainty on the housing market has increased. This has led to several housing developers experiencing difficulty in selling homes and beginning new projects.
The purpose of this Economic Commentary is to explain how the housing developers’ business model works and to clarify the accounting principles their revenue recognition follows.
By Karl Blom, Niklas Frykström and Goran Katinic. The authors work in the Financial Stability Department of the Riksbank.
The Riksbank’s Economic Commentaries contain, for instance, short analyses and debate articles. The opinions expressed in Economic Commentaries are those of the authors and are not to be seen as the Riksbank’s view.