Strange attractor in the Auckland commercial property market

Abstract

Purpose

The purpose of this study is to provide a chaos theory-based framework, which can be used to model commercial property market dynamics.

Design/methodology/approach

The paper is presented in two parts. In the first, rigorous mathematical reasoning is entertained, so to derive an attractor describing a set of feedback formulae. In the second part, the attractor definition is used to model the Auckland commercial office market. The model is exposed through a set of seven scenarios allowing for analysis of the market behaviour under various exogenously imposed conditions.

Findings

The general behaviour of the model is in agreement with the commercial property market conduct observed in Auckland. The model provides information related to the market turning points and allows for an explanation of some intricate market dynamics. These include the anatomy of a market peak and its response to the liquidity oversupply.

Practical implications

The model may be used to expand our understanding of the market performance under various exogenically imposed conditions, which allows for planning of market interventions in a more refined manner.

Originality/value

The paper is original, in the way the chaos theory is applied to the property markets modelling and allows for expanding the understanding of the market behaviour.

Citation

Szweizer, M. (2020), "Strange attractor in the Auckland commercial property market", Journal of Property Investment & Finance, Vol. 38 No. 6, pp. 579-596. https://doi.org/10.1108/JPIF-10-2019-0138