What influence domestic and overseas developers’ decisions?

Abstract

Purpose Foreign firms entering into the domestic real estate industry and foreign investment control are significant in global hot markets such as Australia. Despite their market impact and policy sensitivity, developer choice is rarely studied. The purpose of this paper is to study domestic and overseas property developers for their motive and preference in response to market growth and market barriers including regulatory constraint. Design/methodology/approach International trade theory suggests local and overseas firms can vary significantly for their risk profile when engaging in location-specific development opportunities. Using a comprehensive decision factor system for the residential development process, the authors conducted an experimental survey to collect the prime data to measure stated preference of domestic and overseas developers in the context of the Melbourne residential market. Findings Results suggest high consistency between the samples of domestic and overseas developers. Possible explanations include vertical integration by innovative contracting, strict regulatory constraint dictates domestic and overseas firms’ preference or sample selection bias. This micro-analysis of developer stated preference highlights their entrepreneurial ability to combine substitution and integration for innovative contractual strategy. This ability to join asset holding and project management enables firm flexibility to mitigate business risk in rapidly globalising capital and factor markets. Practical implications These insights of firm-level decision making contribute to the decision literature of real estate developers and are relevant to the broader literature of industrial economics and international trade. Government may evaluate policy strategies based on the explicit entrepreneur (e.g. developer) preference for their “comparative advantage”. Originality/value This paper highlights developer’s ability to jointly consider investment and project management for decision making. It found that other than political cost such as national interest and domestic interest group pressure, domestic and overseas developers in the Melbourne residential market actually think quite alike. It suggests that irrespective of property ownership conditions, market integration occurs in the Melbourne residential sector.

Exploring Multicriteria Elicitation Model Based on Pairwise Comparisons: Building an Interactive Preference Adjustment Algorithm

“…The AHP is one of the best known multicriteria decision aid (MCDA) approaches and is thus widely used [1,22]. AHP is an additive method proposed by Saaty [11][12][13] and, since its introduction, has attracted increasing attention from researchers [22][23][24][25][26]. The method converts subjective assessments of relative importance to a vector of priorities (value function of one criterion), based on PCs performed within each criterion.…”