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The myth of property prices: on the psychology of sellers and buyers

The myth of property prices: on the psychology of sellers and buyers Purpose – The purpose of this paper is to examine the behavior of buyers and sellers in making housing decision and analyses the mechanisms of the seller‐buyer interaction affecting house sale prices. Design/methodology/approach – The research methodology relies on a cross‐sectional telephone survey and the statistical analysis of housing transactions in Hong Kong. Findings – The list price is unimportant to the formation of the sale price. Rather buyer‐seller interactions affect housing prices. The list price is positively related to the number of revisions, and the size of reduction, in the list price, and the list period, but negatively related to the sale‐to‐list‐price ratio. Overpriced properties trigger larger price reductions, noticeably, in the first round of negotiation, and stay on the market longer. Short negotiation periods and time‐till‐sale, and a sale at a marginal reduction in the list price is expected by market participants and conforms with the historical sales data. Hence, market expectations are generally fulfilled and support rationality in a steady market. Research limitations/implications – There are sample size limitations, which might bias the results and weaken the generalizability. The limited housing transactions may not be representative of the population at large. Practical implications – When the market conditions are moderate, offering the property for sale at close to its current market value would determine the best possible selling price. Originality/value – Telephone surveys on home buyer‐seller interactions and critical analysis of sale records are extremely rare in Hong Kong. The paper illustrates how, in times of moderate economic conditions and housing prices, the strategic negotiation process will rationally bring the selling price close to the market value price. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Property Management Emerald Publishing

The myth of property prices: on the psychology of sellers and buyers

Property Management , Volume 26 (3): 20 – Jun 27, 2008

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Publisher
Emerald Publishing
Copyright
Copyright © 2008 Emerald Group Publishing Limited. All rights reserved.
ISSN
0263-7472
DOI
10.1108/02637470810879224
Publisher site
See Article on Publisher Site

Abstract

Purpose – The purpose of this paper is to examine the behavior of buyers and sellers in making housing decision and analyses the mechanisms of the seller‐buyer interaction affecting house sale prices. Design/methodology/approach – The research methodology relies on a cross‐sectional telephone survey and the statistical analysis of housing transactions in Hong Kong. Findings – The list price is unimportant to the formation of the sale price. Rather buyer‐seller interactions affect housing prices. The list price is positively related to the number of revisions, and the size of reduction, in the list price, and the list period, but negatively related to the sale‐to‐list‐price ratio. Overpriced properties trigger larger price reductions, noticeably, in the first round of negotiation, and stay on the market longer. Short negotiation periods and time‐till‐sale, and a sale at a marginal reduction in the list price is expected by market participants and conforms with the historical sales data. Hence, market expectations are generally fulfilled and support rationality in a steady market. Research limitations/implications – There are sample size limitations, which might bias the results and weaken the generalizability. The limited housing transactions may not be representative of the population at large. Practical implications – When the market conditions are moderate, offering the property for sale at close to its current market value would determine the best possible selling price. Originality/value – Telephone surveys on home buyer‐seller interactions and critical analysis of sale records are extremely rare in Hong Kong. The paper illustrates how, in times of moderate economic conditions and housing prices, the strategic negotiation process will rationally bring the selling price close to the market value price.

Journal

Property ManagementEmerald Publishing

Published: Jun 27, 2008

Keywords: Prices; Buyer‐seller relationships; Property marketing; Hong Kong

References