Journal of Property Investment & Finance

ISSN: 1463-578X

Article publication date: 1 August 2004



(2004), "Editorial", Journal of Property Investment & Finance, Vol. 22 No. 4. https://doi.org/10.1108/jpif.2004.11222daa.001



Emerald Group Publishing Limited

Copyright © 2004, Emerald Group Publishing Limited


Behavioural property research was introduced as a new approach to the study of property by Diaz (1999). Since then, this approach has grown into an accepted component of mainstream property academic enquiry and, as Gallimore (1999) predicted in the last special behavioural edition of the Journal of Property Investment & Finance, a “valid framework for property market analysis”. Although behavioural property research still consists only of a small proportion of published papers, recent editions of internationally refereed academic property journals including Real Estate Economics, The Journal of Property Research, The Journal of Real Estate Research and Journal of Property Investment & Finance have observed an increased number of publications in this area. There is evidence that this trend will continue with an increasing number of papers investigating the behavioural aspects of the real estate market being presented at academic property conferences worldwide.

The emergence of a behavioural field of enquiry and the questioning of the underlying concept of the rational man and efficient market hypothesis (EMH) is not unique to property, but is a trend throughout a number of related academic disciplines. For example, Shiller (2000) in his book Irrational Exuberance, investigates the behavioural aspects of financial markets. This investigation illuminates the complex nature of real markets as compared with academic expectations and models. As with behavioural research in property, Shiller (2000) suggests that behavioural finance “as the years go by, is looking less and less like a minor subfield of finance and more and more like a central pillar of serious finance theory”.

Economics as a discipline has also traditionally embraced the overriding concept of the rational man and when behaviour failed to conform with economic theory it was often concluded that this was irrational behaviour, or more embedded in the field of psychology (Green and Kagel, 1987). Over the past 25 years, however, there has been a move away from the traditional insularity between psychology and economics with economists entering into laboratories, traditionally the realm of psychologists, and psychologists beginning to incorporate economic theory into their experimental design and analyses of results (Green and Kagel, 1987). The area of behavioural economics has emerged displaying a transdisciplinary approach to the understanding of behaviour which has continued to attract a growing interest amongst academics as demonstrated by the increasing number of published academic articles in the field in recent years (McFadyen and Wood, 1991).

Consumer behaviour, a subset of the marketing discipline, has also grown from the recognition by economists of the limitations of microeconomic theory in explaining consumer actions. Researchers thus started evaluating markets from the perspective of the behavioural sciences (psychology, sociology, and anthropology). In this context the consumer is viewed as a psychological entity, acting within a social and sociocultural environment (Kassajian and Robertson, 1973).

It is clear from the above discussion that the behavioural approach has proved increasingly attractive to academics from a number of disciplines in recent years. This interest has primarily stemmed from the deficiencies of the theoretical underpinning of the rational man construct to fully explain economic activity. Economic activity, after all, is ultimately human behaviour (Diaz, 1999).

The advent of a behavioural mode of enquiry as an accepted framework for property market analysis has added another dimension to academic research. It could be argued that without it there could, potentially, be dangerous consequences. For example, Shiller (2000) claims that the underlying assumption that all people are thoroughly rational has encouraged many academics to depend on simple and elegant models of market efficiency. This in turn has created a situation where academics are tempted to tackle only problems that can be answered with scientific precision, therefore running the risk of being so narrow as to be irrelevant. If Shiller's argument relating to behavioural finance is accepted in the property context, then an alternative approach to real estate research should be encouraged in order to create an opportunity for theory to become more useful and relevant. This perspective would ultimately lead to a deeper understanding of the more complex aspects of market reality.

Although behavioural research in the property context is a relatively recent development, papers utilising this approach have already contributed major insights into the functioning of property markets. For example, a number of key papers have studied the process of property asset valuation and are throwing light on questions that are fundamental to property economics. Examples of recent contributions from the literature include studies on valuation judgement in terms of different reference points, transaction feedback, transaction price, client feedback and client influence (Diaz and Hansz, 2001; Hansz and Diaz, 2001; Havard, 2001; Gallimore and Wolverton, 2000; Wolverton and Gallimore, 1999; Levy and Schuck, 1999). Findings from these and other published research projects in this area are contributing to such critical issues as real estate market pricing and the construction of real estate indexes.

A substantial amount of recent research effort has also offered a greater appreciation and deeper understanding of the behaviour of participants in the property market including consumers, lenders, brokers, investors, developers and landowners (Gallimore and Gray, 2002; Webb, 2000; Levy and Lee, 2000; Adams et al., 2001; Gallimore et al., 2000). Knowledge of how these players in the market behave is fundamental to the understanding of property.

The behavioural approach to property research has also promoted different tools and perspectives from psychology, which in turn has enabled researchers to expand the type of questions that can successfully be considered. The acceptance of varied research methods and methodologies not routinely employed in the traditional approach to property research is becoming more common. For example there has been a significant increase in the collection of primary data via instruments such as surveys, experiments and interviews in place of the analysis of secondary databases. There is also evidence of a growing acceptance of a qualitative approach to research, which is especially useful for behavioural researchers for its ability in investigating the behaviour of individual players in the property market (Levy and Henry, 2001).

The four papers included in this special edition are authored by academics from the USA, the UK, Australia and New Zealand. These papers display two striking features. First, they demonstrate the diversity of research methods that has been so effectively utilised in gaining a better understanding of the behaviour of participants in the property market. Second, these papers illustrate the range of research questions capable of being addressed by this approach.

Leishman and Watkins analyse evidence from a survey of 119 office occupiers in Edinburgh in order to challenge the standard neo-classical assumption that firms make rational profit-maximising decisions on the basis of full information. The paper concludes that a firm's decisions are closely related to their size, business type and whether the market they serve is local, regional or national. The use of cluster analysis techniques enables the construction of a classification of property types within the Edinburgh market and thus new empirical evidence of the way characteristics of the firm influence their decision choice. The outcome of this provides an extension to existing behavioural studies.

Diaz, Gallimore and Levy conduct a series of experiments examining valuation behaviour in the UK, USA and New Zealand. The outcome of the study highlights the effects of culture on valuer behaviour and raises the question as to the effect of cultural influence on other players in the real estate market. The findings overall are consistent with the need to seek cognitive efficiency and reduce cognitive effort even at the expense of performance and quality.

Kupke uses multidimensional scaling as a tool in mapping first impressions and the retail centre image held by consumers. Identifying people's first impressions of real estate environments and how they “feel” about property attributes is vital information for property managers and owners desirous of create and sustaining property values. As illustrated in each of the papers included in this edition, the results indicate that the traditional concept of rationality may not be a primary determinant of choice.

Levy and Lee's paper brings into the mainstream real estate literature information relating to the impact of family behaviour on real estate purchasing decisions. In particular, it investigates roles of different family members and their influence at different stages of the decision making process. Unlike work in neo-classical economics (and by extension in most real estate applications) the family is treated as a group of individuals entering into a joint decision making process, rather than as a single individual or as if the paternal head of the household personifies the family as whole. This paper, in contrast to others in this issue, utilises a purely qualitative research approach by way of a series of in-depth interviews.

In conclusion, this behavioural issue brings together four papers which by virtue of their research questions query the underlying assumptions embedded in neo-classical economic theory. By the use of nontraditional research techniques (both qualitative and quantitative), the authors have been able to foster a deeper understanding of property markets and the players within them. Although behavioural property research is relatively recent, still much remains to be done to understand fully the behaviour of players such as investors, lenders, property professionals, consumers and policy makers. The inclusion of this type of research in mainstream academic enquiry creates an exciting synergy between economics and behavioural science, which may be viewed as one of the most important recent developments in the field of property research.


Adams, D., Disberry, A., Hutchison, N. and Munjoma, T. (2001), “Urban redevelopment: contextual influences and landowner behaviour”, Journal of Property Research, Vol. 18 No. 3, pp. 217-34.

Diaz, J. III (1999), “The first decade of behavioral research in the discipline of property”, Journal of Property Investment & Finance, Vol. 17 No. 4, pp. 326-32.

Diaz, J. III and Hansz, J.A. (2001), “The use of reference points in valuation judgement”, Journal of Property Research, Vol. 18 No. 2, pp. 141-8.

Gallimore, P. (1999), “Editorial”, Journal of Property Investment & Finance, Vol. 17 No. 4, p. 1.

Gallimore, P. and Gray, A. (2002), “The role of investor sentiment in property investment decisions”, Journal of Property Research, Vol. 19 No. 2, pp. 111-20.

Gallimore, P. and Wolverton, M. (2000), “The objective in valuation: a study of the influence of client feedback”, Journal of Property Research, Vol. 17 No. 1, pp. 47-57.

Gallimore, P., Hansz, J.A. and Gray, A. (2000), “Decision making in small property companies”, Journal of Property Investment & Finance, Vol. 18 No. 6, pp. 602-12.

Green, L. and Kagel, J.H. (1987), Advances in Behavioral Economics, Ablex Publishing, Westport, CT.

Hansz, J.A. and Diaz, J. III (2001), “Valuation bias and commercial appraisal: a transaction price feedback experiment”, Real Estate Economics, Vol. 29 No. 4, pp. 553-65.

Havard, T.M. (2001), “An experimental evaluation of the effect of data presentation on heuristic bias in commercial valuation”, Journal of Property Research, Vol. 18 No. 1, pp. 51-67.

Kassajian, H.H. and Robertson, T.S. (1973), Perspectives in Consumer Behavior, rev. ed., Scott, Foresman and Company, Glenview, IL.

Levy, D. and Henry, M. (2001), “An analysis of published property research methodologies and methods”, paper presented at “Cutting Edge 2001” Property Research Conference of the Royal Institution of Chartered Surveyors, Oxford.

Levy, D. and Lee, C.C.-K. (2000), “Family influence in decision making processes for housing”, paper presented at “Cutting Edge 2000” Property Research Conference of the Royal Institution of Chartered Surveyors, London.

Levy, D. and Schuck, E. (1999), “The influence of clients on valuations”, Journal of Property Investment & Finance, Vol. 17 No. 4, pp. 380-400.

McFadyen, J. and Wood, H. (1991), Economics – Psychological Aspects, Elsevier Science Publishers, Amsterdam.

Shiller, R.J. (2000), Irrational Exuberance, Princeton University Press, Princeton NJ.

Webb, J.R. (2000), “An inquiry into the professional self image of real estate agents”, Journal of Real Estate Research, Vol. 20 Nos 1/2, pp. 153-77.

Wolverton, M.L. and Gallimore, P. (1999), “Client feedback the role of the appraiser”, Journal of Real Estate Research, Vol. 18 No. 3, pp. 415-31.

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