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1 – 10 of over 16000Satakhun Kosavinta, Donyaprueth Krairit and Do Ba Khang
The purpose of this paper is to investigate the rationality of the decision making of residential developers in Thailand. Exploring its implications in the residential development…
Abstract
Purpose
The purpose of this paper is to investigate the rationality of the decision making of residential developers in Thailand. Exploring its implications in the residential development field, the researchers propose the famous prospect theory as the primary cause of developers’ incompetent decisions during the pre-development stage of residential development.
Design/methodology/approach
The methodologies used in this research include literature review, expert interview, and experimental questionnaire.
Findings
The results show that Thai developers exhibit all five aspects of prospect theory: loss aversion, fourfold pattern, bias from rare events, mental accounting, and preference reversals (PR); however, in contrast to previous literature, the researchers found that Thai developers always choose to receive gains, and usually make risky choices to avoid losses, even if the risk of loss is low. Moreover, status quo bias has a low influence on Thai developers: they tend to become attached to the areas they develop, but remain flexible in selecting a project type that fits the land. In addition, PR and the framing effect affect only some groups of developers.
Practical implications
This research provides awareness to professionals in the residential development field to make sound judgements, using Thailand as a case study.
Originality/value
This paper reveals the existence of the unproven prospect theory in the residential development field using an empirical study in Thailand as a case study.
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Rolf Barlindhaug and Berit Irene Nordahl
This paper aims to investigate whether developers’ ask lower prices on homes in redevelopment sites than they do on similar units in smaller developments completed over a shorter…
Abstract
Purpose
This paper aims to investigate whether developers’ ask lower prices on homes in redevelopment sites than they do on similar units in smaller developments completed over a shorter time span. It also investigates whether developers price units differently at different stages of the redevelopment process. The development of designated redevelopment areas often consists of multiple projects spread across several years, some in parallel, some sequential. New units are put on the market in a piecemeal fashion, and infrastructure, shared green spaces and shared facilities are installed successively.
Design/methodology/approach
A hedonic price model is used to analyse sales prices of 7,000 new apartments in Oslo sold between 2011 and 2015, all else being equal. The paper distinguishes between infill as one-stage projects, and multi-staged competitive and multi-staged monopolistic redevelopments.
Findings
Dwellings in redevelopment projects sell at a lower price than similar dwellings in infill projects. In competitive redevelopments, those in charge of the last projects put a slightly higher price on apartments. In redevelopments involving only one developer, the last stages ask the lowest prices.
Research limitations/implications
This research expands our understanding of developers’ pricing behaviour. Developers supplying housing for the private market through redevelopments land are willing to take risks particularly in the initial stage.
Practical implications
The findings indicate that credit institutions financing developers’ projects need to take into account the structure of selling prices, including lower prices and higher risk of pursuing redevelopment projects.
Social implications
Gaining a better understanding of developers’ pricing behaviour deepens our insights into the dynamics of market-led urban brownfield developments; this knowledge may moreover inform policies on sustainable urban growth.
Originality/value
An original investigation of housing transactions in urban brownfield sites in Oslo provides fresh insights into developers’ pricing behaviour.
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Franz Fuerst and Anna‐Maija Grandy
Expectations of future market conditions are acknowledged to be crucial for the development decision and hence for shaping the built environment. The purpose of this paper is to…
Abstract
Purpose
Expectations of future market conditions are acknowledged to be crucial for the development decision and hence for shaping the built environment. The purpose of this paper is to study the central London office market from 1987 to 2009 and test for evidence of rational, adaptive and naive expectations.
Design/methodology/approach
Two parallel approaches are applied to test for either rational or adaptive/naive expectations: vector auto‐regressive (VAR) approach with Granger causality tests and recursive OLS regression with one‐step forecasts.
Findings
Applying VAR models and a recursive OLS regression with one‐step forecasts, the authors do not find evidence of adaptive and naïve expectations of developers. Although the magnitude of the errors and the length of time lags between market signal and construction starts vary over time and development cycles, the results confirm that developer decisions are explained, to a large extent, by contemporaneous and historic conditions in both the City and the West End, but this is more likely to stem from the lengthy design, financing and planning permission processes rather than adaptive or naive expectations.
Research limitations/implications
More generally, the results of this study suggest that real estate cycles are largely generated endogenously rather than being the result of large demand shocks and/or irrational behaviour.
Practical implications
Developers may be able to generate excess profits by exploiting market inefficiencies but this may be hindered in practice by the long periods necessary for planning and construction of the asset.
Originality/value
This paper focuses the scholarly debate of real estate cycles on the role of expectations. It is also one of very few spatially disaggregate studies of the subject matter.
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Seow Eng Ong, Fook Jam Cheng, Boaz Boon and Tien Foo Sing
Real estate developers often operate in oligopolistic environments. Pricing strategies must be made in an interactive framework that makes empirical evaluation difficult. This…
Abstract
Real estate developers often operate in oligopolistic environments. Pricing strategies must be made in an interactive framework that makes empirical evaluation difficult. This study appeals to economic experiments to examine how developers price their properties, especially when there is an option to market pre‐completed units. In addition, the interaction between bidding for land and pricing the end product is examined. The results indicate that competitor actions are important considerations in pricing decisions. In particular, the profit maximizing pricing strategy depends critically on being competitive, not necessarily being the most aggressive. Interestingly, pre‐completed units sell only at prices that incorporate future price expectations, and successful bids tend to precipitate more aggressive pricing. Finally, competitive bidding and pricing strategies appear to the best profit maximizing strategy.
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Franz Fuerst and Patrick McAllister
The purpose of this paper is to investigate the relationships between supply and demand in 19 European office markets in the period 1991‐2006. It estimates the variations in the…
Abstract
Purpose
The purpose of this paper is to investigate the relationships between supply and demand in 19 European office markets in the period 1991‐2006. It estimates the variations in the price elasticity of supply across the different markets. The paper tests whether developers display evidence of myopic or rational expectations in their behaviour.
Design/methodology/approach
The paper draws upon a time series of rental, take‐up and new completions for 20 European office markets. A static measurement of price elasticity is calculated for each office market. To measure this expected supply response in the empirical analysis, the paper applies an impulse response analysis.
Findings
There is an evidence of positive and negative price elasticity. In a significant proportion of cities, supply increases following falls in rental levels. As a result, there is some evidence of myopic behaviour in a proportion of the markets examined, there is little evidence to support the hypothesis that real estate developers systematically display myopic expectations. The diversity in developer responses to price signals is surprising. It is concluded that idiosyncratic rather than systematic factors may dominate supply‐side responses to market signals.
Research limitations/implications
This paper is essentially exploratory and raises a number of questions for further investigation. There is scope to address the research questions using better data series, in particular, net absorption rates, construction starts, real rental growth rates and different geographical definitions. There is also scope to extend the research to examine the causal factors underlying differences in supply elasticity, for instance, the relative contribution of constraining variables such regulatory restrictions and limitations in physical capacity. It is also possible to model the supply adjustment process more dynamically in an error‐correction framework.
Practical implications
The findings would suggest that the complexity and diversity of economic, institutional and capital market influences affecting European commercial real estate markets seem to be far too numerous for any single model of market or developer behaviour to explain.
Originality/value
This is the first paper to examine supply elasticity across a broad range of European office markets.
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Imanda Luzari Indomo and Arief Wibisono Lubis
The issue of capital structure among property developers in Indonesia becomes interesting as the government speeds up housing development. Examining which theory prevails…
Abstract
Purpose
The issue of capital structure among property developers in Indonesia becomes interesting as the government speeds up housing development. Examining which theory prevails (trade-off versus pecking order) can be done by looking at several determinants of capital structure. This study aims to argue that examining determinants of capital structure in this context should also incorporate business cycles, as the activities of property developers are cyclical.
Design/methodology/approach
Using a total of 183 observations of listed property developers from 2010 to 2019, this study uses the ordinary least squares regression technique. The focus is on determinants of capital structure, which are profitability, tangibility, firm size, ownership and potential growth. The observations are divided into different business cycles (expansion, peak, trough and decline) based on economic growth rates.
Findings
The results show that the natures of relationships between capital structure (leverage) and its determinants are different during distinct business cycles. For example, profitability has a significant and positive effect on leverage during peak, but the signs are negative during trough and decline. Trade-off theory provides a better explanation of property developers’ capital structure behaviour during peak while pecking order theory is more relevant during trough. It is more difficult to conclude which of these theories is superior in expansion and sideways.
Originality/value
There have been limited studies that focus on corporate finance issues of property developers in Indonesia, and no particular attention has been given to the role of business cycles.
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Yang Zhao, Ruoxin Zhou and Yinping Ci
The purpose of this paper is to explore the key factors influencing the service innovation of mobile social networks (MSNs), figure out the mechanism of all factors in different…
Abstract
Purpose
The purpose of this paper is to explore the key factors influencing the service innovation of mobile social networks (MSNs), figure out the mechanism of all factors in different stages of service innovation and help mobile social application developers promote better service innovation.
Design/methodology/approach
From previous research, this paper adopted nine initial factors that influence the service innovation of MSNs, and divide the service innovation process into three stages (i.e. demand analysis, service design and innovation implementation). On that basis, the authors constructed a model, and then collected data from 184 managers from 20 leading MSN corporates in China through questionnaires to examine the model. Furthermore, factor analysis was used to extract key factors influencing the service innovation of MSNs, correlation analysis was employed to discuss the relationship among factors and regression analysis was applied to explore their specific roles in different stages in the service innovation process.
Findings
The empirical results show that the service innovation of MSNs is mainly influenced by five key factors: user, developer, market environment, social environment and technology. The authors found that different factors played remarkably different roles in the three stages. In specific, all factors but technology are important in the demand analysis stage; all factors but social environment are critical to service design; and all factors but user contribute to the implementation of service innovation.
Practical implications
The results of this study can help mobile social application developers and mobile social service providers in China to better understand the driving force of service innovation and what should be emphasized in different stages, and then find the optimal path to implement service innovation, improve their service quality and user experience and facilitate the development of Chinese MSNs.
Originality/value
This is the first research that comprehensively explores factors influencing the service innovation of Chinese MSNs from multi-dimensional perspectives, which provides profound theoretical guidance to the practice of service innovation in China. Also, it contributes to the development of innovation theory of traditional web services.
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The paper examines the operation of the Land (compulsory sale for redevelopment) Ordinance, one of a series of urban renewal policy initiatives introduced by the Hong Kong…
Abstract
Purpose
The paper examines the operation of the Land (compulsory sale for redevelopment) Ordinance, one of a series of urban renewal policy initiatives introduced by the Hong Kong Government. The new institutional arrangement was mooted as a means to facilitate greater private sector participation in the renewal process by overcoming existing constraints on land assembly, which arise as the result of a system of common property ownership. The paper investigates whether the legislation can achieve the objective of encouraging private sector participation in the urban renewal process
Design/methodology/approach
The paper adopts a transaction cost framework, drawn from literature and applied in the context of real estate, to examine the effects of a new Ordinance. In addition to publicly available data, semi‐structured interviews were conducted with professionals involved in urban renewal and representatives from the property development companies. The apparently low usage of the new approach is explored in the context of the various alternative mechanisms for land assembly available to the private sector and the effects of transactions costs on developer behaviour.
Findings
The paper identifies that the relatively low usage of the Ordinance may be explained by institutional constraints and limitations in the legislation, which, in its current form, fails to provide sufficient incentives, but that developer behaviour may also be affected by other external factors.
Research limitations/implications
The research is limited in that any commentary on the effectiveness of the legislation in achieving its objectives is restricted by the inability to clearly identify those incidences where the threat of legal action was sufficient to achieve a negotiated acquisition of the necessary property rights. Further research might explore the implications and the inter‐relationships between the various urban renewal initiatives introduced by the Hong Kong Government.
Practical implications
The recent experience of the Hong Kong Government in designing a new institutional mechanism to overcome problems of private sector land assembly for properties in multiple‐ownership may offer more general lessons for those in similar environments who wish to use the resources of the private sector to contribute to the urban renewal process.
Originality/value
The paper adopts a transaction cost approach to examine the working of a new policy initiative for facilitating land assembly in Hong Kong and may be of interest to academics and practitioners involved in the area of urban renewal.
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The purpose of this paper is to examine the effects of financialisation on the changing structure of housing supply in Malaysia. The share of newly launched sub-MYR250,000 houses…
Abstract
Purpose
The purpose of this paper is to examine the effects of financialisation on the changing structure of housing supply in Malaysia. The share of newly launched sub-MYR250,000 houses has been decreasing continuously in the past decade. This implies that housing developers are launching more expensive houses. The greater focus on higher cost housing could be attributed to inflation. But while input cost is rising, the housing sector has also become increasingly financialised. This claim can be supported by the rising share of mortgage and real estate loans in gross domestic product. Financialisation is a process in which the financial sector becomes more dominant relative to the real sector. The extent to which this process is responsible for the changing structure of housing supply in Malaysia is investigated.
Design/methodology/approach
A survey of the literature suggested that the decreasing the proportion of newly launched sub-MYR250,000 housing could be result of rising input cost, greater degree of financialisation and changing market concentration. Thus, long-run cointegrating equations were formulated and estimated. These equations linked housing share with financialisation, market structure and input cost. The quantitative and qualitative impact of financialisation on the structure of housing supply is of interest.
Findings
The analyses of secondary data suggested that financialisation and input cost did indeed contribute to the decrease in proportion of newly launched sub-MYR250,000 housing. However, the impact of market concentration on housing share was ambiguous. This conclusion survived several robustness checks.
Practical implications
The financialisation of the housing sector implies that developers are increasingly building for profits instead of accommodating the social objective of providing shelter. This result is unsettling because access to adequate housing is a human right. The transformation of housing from the concept of a shelter to a tradable, money-making asset could be a major contributor to the declining housing affordability in the country. Thus, efforts to improve affordability must take account of the effects of financialisation.
Originality/value
An empirical framework for assessing the changes in the structure of housing supply was developed. Existing studies tended to focus only on the volume of housing supply. It is a comprehensive study on changes in the structure of housing supply. Second, while existing studies on the financialisation of housing are mostly qualitative in methodology, this paper offers a quantitative assessment of the financialisation in the housing sector.
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Emmanuel Itodo Daniel, Olalekan Oshodi, Daniel Dabara and Nenpin Dimka
Housing provides constructed space for human activities. Literature indicates that housing impacts wealth, education attainment and health outcomes, among others. Because of its…
Abstract
Purpose
Housing provides constructed space for human activities. Literature indicates that housing impacts wealth, education attainment and health outcomes, among others. Because of its contributions to society, it is essential to develop and implement strategies that address the housing shortage experienced in most cities across the globe. This study aims to unpack the factors affecting housing production in the UK and chart the way forward.
Design/methodology/approach
In addressing this study's aim, an interprivitst approach was adopted and semi-structured interviews were conducted with 18 experienced professionals. Data were collected across the four nations of the UK (England, Wales, Scotland and Northern Ireland).
Findings
The results indicated that the opportunistic behaviour of stakeholders is one of the main factors affecting housing production in the study area. Also, modern construction methods, collaborative practices, government intervention and affordable housing schemes were identified as key strategies for addressing housing production factors.
Practical implications
This study identified strategies for mitigating housing production issues that provide a focal point to all stakeholders keen on filling the housing shortage gap and improving productivity to channel their resources and effort accordingly.
Originality/value
To the best of the authors’ knowledge, this study is one of the first to empirically analyse the influencing factors on the housing gap in the UK from the perspective of the supply side to provide information that could lead towards closing the said gap.
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