Property Market Efficiency: An Institutional Economics Perspective

Abstract

This paper reassesses the debate around property market efficiency and introduces an institutional perspective. It considers property market efficiency in terms of the specific characteristics of property itself and the processes through which property is used and traded. It argues that the institutional dimension fundamentally alters the concept of efficiency and leads to a partial and contingent judgement on achieved efficiency. Instead of seeking a judgement on whether the 'property market' as an entity is efficient, the institutional approach allows the possibility that 'property market process' may be efficient for some market participants but not for others. It also introduces a time dimension, suggesting the need to assess the adaptability of property market process as economic and social conditions change.

The real estate markets: Players, institutions and territories

“…In order to get beyond the abstract and generalising approaches, which, when following the neoclassical model, result in econometric studies on optimal investment portfolio structures, and following the Marxist model 1 end up suppressing the role of the players entirely, various authors have, from the 1990s onwards, endeavoured to prise open the real estate market black box. Some of them immediately emphasised the players, institutions and processes at work in real estate market operations, whether this be from an institutionalist perspective (Healey, 1991(Healey, , 1992(Healey, and 1999Ball, 1998;Keogh and D'Arcy, 1999;Guy and Henneberry, 2000) or a Marxist perspective (Haila, 1991;Fainstein, 1994;Beauregard, 1994;Charney, 2001). From the year 2000 onwards, writing on the real estate markets started to view urban production as part of the neo-liberal institutional system (Swyngedouw et al, 2002;Fainstein, 2008).…”

Western European housing systems and the impact of the international financial crisis

“…On the supply side, agents producing dwellings and housing services, such as building companies, developers, commercial and social landlords, are the key agents. Institutions are the rules, norms and regulations by which a system functions (Keogh andD'Arcy 1999 in Oxley 2004). Demand, supply and institutions meet on the housing market, where the outcomes of the system are the consequence.…”

The Re-specification of Concepts in the Morphogenetic Approach for Property Market Research

“…The institutional approach accepts that, like all social systems, property markets are created by certain social actors in a certain time; and property markets may change dependent on social actors' decisions and behaviours and dependent on interrelations between social actors (Healey, 1995;Henneberry & Roberts, 2008). According to this approach, social actors and interrelations between them, and also social structures established to condition property market players prevent the emergence of sudden structural and cultural changes in a property market so the change of a property market has to be considered as a process which progresses cumulatively and evolutionary (Keogh & D'Arcy, 1999;Magalhaes, 1998). The issue of how a property market is created and how it changes in time is important because property markets have an efficient role in the development of urban built environments (D'Arcy & Keogh, 1998).…”