Understand How Developers Construct the Pricing of the Residential Property by Process Tracing Protocol
||Chang, Nell; Havard, Tim
||Understand How Developers Construct the Pricing of the Residential Property by Process Tracing Protocol
||16th Annual European Real Estate Society Conference in Stockholm, Sweden
||The behavioural school of valuation thought believed that the practitioners and academics should reflect market behaviour in valuation. Previous research has identified various variables that affect/ determine property prices. However there is little research into how the major market players such as developer perceive those price determinants and how such perceptions affect the process of making real-life decisions. This research employs a practitioner experiment to investigate how developers make their pricing decision in a simulated situation. The process tracing protocol that tries to follow the human decision-making processes is widely employed in the behavioural research. The professionals, usually the appraisers, and the novices are requested to solve a problem that involves decision making, in which the researcher needs to observe the sequence of requested and utilized information; this traces the problem solving process. The findings come from 23 practitioner experiments of the Hong Kong and Beijing developers, who were requested to give opinion on the price ranges of four residential developments in an unfamiliar city. The research reveals that financial factors are considered at an earlier stage than other distance, environment and property factors. Hong Kong developers would consider affordability (average personal income), land and construction cost, number of apartments completed per annum and future market trends. Beijing developers would consider sale situation, rental rate and living standard. In terms of the first factor considered, there is a clear trend that developers from the two cities would first consider distance to transport, location, distance to central business district and environment. Generally the sequence of how developers consider the factors does reflect the importance of the factors in developersí perception; most of the first considered factors are major factors in the final pricing decisions but there are exceptions. This reflects the complexity of real-life decision when developers need to decide whether the desirable characteristics/features of individual apartments can compensate the undesirable ones. The final pricing result of all developers demonstrates certain level of consent to which development should be priced the highest and the 2nd highest etc. However Hong Kong developers show more deviation in their pricing opinion as compared to the Beijing developers. This implies even professional such as developers might not have an agreement on what factors are most significant in constituting the price.
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