Effects of Behavioural Uncertainties In Property Valuation
DOI:
https://doi.org/10.11113/ijbes.v7.n3.557Keywords:
Behavioural Uncertainties, Property Valuation, Valuation Judgement, Behavioural Economics, Validity and Accuracy, Johor Bahru, MalaysiaAbstract
Psychological and behavioural dimensions play a vital role in influencing Valuers’ valuation judgements, thus affecting the validity, accuracy and discrepancy (reliability) of property values. However, behavioural uncertainty research, specifically within the discipline of property valuation among property Valuers, is still limited, particularly in developing countries with their unique property valuation systems, and has been so far conducted in an independent, separate manner, which looks into the behavioural uncertainties non-connectedly. Therefore, this study aims to examine the behavioural uncertainties of local Valuers in property valuation, vitally addressing the questions of behaviours involved and how a behavioural uncertainty is associated with other behavioural issues. This study adopted a phenomenological design, where a session of focus group discussions with 10 public-private Valuers from Johor Bahru, Malaysia was conducted. Results show that local Valuers were subject to various, simultaneous interwoven behavioural uncertainties, which ultimately form a behavioural framework of associations, including biases, client influences, heuristics, professional ethics, and opportunistic behaviours in making their valuation judgement. Biases (subjective preference) and professional ethics (negligence and carelessness) are the two most dominant behaviours involved in local property valuation. These findings provide policy insights to both public and private Valuers, academicians, and the market about the importance of understanding behavioural property economics, that crucially enables them to collectively create a sustainable property valuation environment.
References
Achu, K. (2013). Client Influence on Property Valuation: A literature Review. International Journal of Real Estate Studies, 8(2): 24-47.
Amidu, A. R., and Aluko, B. T. (2007). Client Influence on Valuation: Perceptual Analysis of the Driving Factors. International Journal of Strategic Property Management, 11: 77-89.
Atilola, M. I., Ismail, A., Achu, K., & Bujang, A. A. (2019). An evaluation of factors causing variance in property assessment. Planning Malaysia, 17(9): 82-93
Ayuthaya, N.P. and Fredric, W.S. (2014). Factors influencing variation in value and investor confidence. IOSR Journal of Business and Management, 16(5): 41-51.
Baffour Awuah, K. G., & Gyamfi-Yeboah, F. (2017). The role of task complexity in valuation errors analysis in a developing real estate market. Journal of Property Research, 34(1): 54-76.
Baum, A., Crosby, N., Gallimore, P., Gray, A., and McAllister, P. (2000). The Influence of Valuers and Valuations on The Workings of The Commercial Property Investment Market. Report for The Education Trusts of the Investment Property Forum, Jones Lang Lasalle and the Royal Institution of Chartered Surveyors, London.
Bryman, A. (2008). Social Research Methods, 2nd edition, Oxford: Oxford University Press.
Cho, M., and Megbolugbe, I. (1996). An Empirical Analysis of Property Appraisal and Mortgage Redlining. Journal of Real Estate Finance and Economics, 13(1): 45–55.
Clayton, J., Geltner, D., and Hamilton, S.W. (2001). Smoothing in Commercial Property Valuations: Evidence From Individual Appraisals. Real Estate Economics, 29(3): 337–360.
Crosby, N. (2000).Valuation Accuracy, Variation and Bias in The Context of Standards and Expectations. Journal of Property Investment & Finance, 18(2): 130 – 161.
Diaz, J. III (1997). An Investigation Into The Impact of Previous Expert Value Estimates on Appraisal Judgment. Journal of Real Estate Research, 13(1): 57–66.
Diaz, J. III. (1990). How Appraisers Do Their Work: A Test of The Appraisal Process and The Development of A Descriptive Model. Journal of Real Estate Research, 5(1): 1–15.
Diaz, J. III., Zhao, R., and Black, R. (1999). Does contingent reward reduce negotiation anchoring? Journal of Property Investment and Finance, 17(4): 374–379.
Diaz, J., Gallimore, P., and Levy, D. (2002). Residential valuation behaviour in the United States, the United Kingdom and New Zealand. Journal of Property Research, 19(4): 313-326.
Diaz, Julian III., and Hansz, A.J. (1997). How valuers use the value opinions of others. Journal of Property Valuation and Investment, 15(3): 256–260.
Diaz, Julian III., and Hansz, A.J. (2007). Understanding the behavioural paradigm in property research. Pacific Rim Property Research Journal, 13(1): 16–34.
Evans (1989). Biases in human reasoning: Causes and consequences. Laurence Erlbaum Associates, Hillsdale, NJ.
French, N., and Gabrielli, L. (2003). The Uncertainty of Valuation. Journal of Property Investment & Finance, 22(6): 484 – 500.
French, N., and Mallinson, M. (2000). Uncertainty in Property Valuation. The nature and relevance of uncertainty and how it might be measured and reported. Journal of Property and Finance, 18(1): 13-32.
Gallimore, P. (1994). Aspects of information processing in valuation judgment and choice. Journal of Property Research, 11(2): 97–110.
Gallimore, P. (1996). Confirmation bias in the valuation process: A test for corroborating evidence. Journal of Property Research, 13(4): 261–273.
Gallimore, P. (2004). Behavioural real estate research. Retrieved from http://construction.ntu.ac.uk/graduate_school/Research/Property. [Accessed on 8 January 2017].
Gallimore, P., and Gray, A. (2002). The role of investor sentiment in property investment decisions. Journal of Property Research, 19(2): 111–120.
Gallimore, P., and Wolverton, M. (1997). Price-knowledge-induced bias: a cross-cultural comparison. Journal of Property Valuation & Investment, 15(3): 261-273.
Gallimore, P., Hansz, J.A., and Gray, A. (2000). Decision making in small property companies. Journal of Property Investment & Finance, 18(6): 602–612.
Guest, G., Bunce, A., and Johnson, L. (2006). How many interviews are enough? An experiment with data saturation and variability. Field Methods, 18: 59-82.
Hansz, J.A., and Diaz, J. III (2001). Valuation bias in commercial appraisal: A transaction price feedback experiment. Real Estate Economics, 29(4): 553–565.
Havard, T. (2000). An examination of the relationship between the anchoring and adjustment heuristic and variance in commercial property. Paper presented at the RICS 'Cutting Edge' Conference.
Hogarth, R. (1981). Beyond discrete biases: Functional and dysfunctional aspects of judgmental heuristics. Psychological Bulletin, 90: 97–217.
Iroham, C. O., Ogunba, O. A., and Oloyede, S. A. (2014). Effect of Principal Heuristics on Accuracy of Property Valuation in Nigeria. Journal of land and Rural Studies, 2(1): 89-111.
Ismail, Suriatini, and T. Buyong. 1998. Residential property valuation using geographic information system. Buletin Geoinformasi, 2(2): 249-266.
Kahneman, D. and Tversky, A. (2000). Choices, values, and frames. Cambridge, England: University Press.
Kahneman, D., and Tversky, A. (1981). The framing of decision and the psychology of choice. Science Approach, 211: 4481.
Kinnard, W. N. Jr., Lenk, M. M., and Worzala, E. M. (1997). Client pressure in the commercial appraisal industry: how prevalent is it? Journal of Property Valuation & Investment, 15(3): 233-44.
Klamer, P., Bakker, C., & Gruis, V. (2017). Research bias in judgement bias studies–a systematic review of valuation judgement literature. Journal of Property Research, 34(4): 285-304.
Klein, G., and Kahneman, D. (2009). Conditions for Intuitive Expertise: A Failure to Disagree. American Psychologist, 64(6): 515-526.
Kucharska-Stasiak, E. (2013). Uncertainty of property valuation as a subject of academic research, Real Estate Management and Valuation, 21(4): 17-25.
Levitt, S.D., and Dubner, S.J. (Eds.) (2005). Freakonomics: A rogue economist explores the hidden side of everything. NY: William Morrow.
Levy, D., and Schuck, E. (1999). The Influence of clients on Valuations. Journal of Property Investment and Finance, 17(4): 182-201
Levy, D., and Schuck, E. (2005). The influence of clients on valuations: the clients' perspective. Journal of Property Investment & Finance, 23(2): 182-201.
Ling, G. H. T., Leng, P. C., & Ho, C. S. (2019). Effects of Diverse Property Rights on Rural Neighbourhood Public Open Space (POS) Governance: Evidence from Sabah, Malaysia. Economies, 7(2): 61.
Lowies, G.A., Hall, J.H., and Cloete, C.E. (2013). The influence of frame dependence on investment decisions made by listed property fund managers in South Africa. Journal of Economics and Behavioral Studies, 5(11): 805-814.
MacCowan, R.J. and Orr, A. (2008). A behavioural study of the decision processes underpinning disposals by property fund managers, Journal of Property Investment and Finance, 26(4): 342‐361.
Mohammad, N. E., Ali, H. M., & Jasimin, T. H. (2018). Valuer's behavioural uncertainties in property valuation decision making. Planning Malaysia, 16(5): 239-250
Mullainathan, S. and Thaler, R. (2000). Behavioral Economics, Cambridge, MA: National Bureau for Economic Research. Working Paper No. W7948.
Nasir, Asmah Mohd. 2006. Valuation variance of commercial properties in Malaysia. Pacific Rim Property Research Journal, 12(3): 272-282.
Quan, D.C., and Quigley, J.M. (1991). Price formation and the appraisal function in real estate markets. Journal of Real Estate Finance and Economics, 4(2): 127-146.
Salzman, D., and Zwinkels, R. (2013). Behavioural Real Estate. No. 13-088/IV/DSF58, Tinbergen Institute Discussion Paper.
Shefrin, H. (2002). Beyond Greed and Fear: Understanding Behavioural Finance and the Psychology of Investing. Oxford University Press, New York, NY.
Shiller, R. J. (2002). Bubbles, Human Judgement and Expert Opinion. Financial Analysts Journal, 58(3): 18-26.
Simon, H. (1978). Information processing theory of human problem solving. In W.K. Estes (ed.), Handbook of learning and cognitive processes 5, Erlbaum, Hillsdale, NJ, 271–295.
Tversky, A., and Kahneman, D. (1973). Availability: A heuristic for judging frequency and probablity. Cognitive Psychology, 5(2): 207-232.
Tversky, A., and Kahneman, D. (1974). Judgement under uncertainty: Heuristics and biases. Science Approach, 11(September): 24–31.
Warren-Myers, G. (2015). Editorial, Journal of Property Investment & Finance, 33(2)
Williamson, O. E. (1975). Markets and hierarchies. New York: Free Press.
Wolverton, M., and Gallimore, P. (1999). Client feedback and the role of the appraiser, Journal of Real Estate Research, 18(3): 415-31.
Yiu, C. Y., Tang, B. S., Chiang, Y. H., and Choy, L. H. T. (2006). Alternative Theories of Appraisal Bias. Journal of Real Estate Literature, 14(3): 321-344
Downloads
Published
How to Cite
Issue
Section
License
Copyright of articles that appear in International Journal of Built Environment and Sustainability belongs exclusively to Penerbit Universiti Teknologi Malaysia (Penerbit UTM Press). This copyright covers the rights to reproduce the article, including reprints, electronic reproductions or any other reproductions of similar nature.
Authors who publish with this journal agree to the following terms:
- This Journal applies Creative Commons Licenses of CC-BY-NC-SA
- Authors retain copyright and grant the journal right of publication with the work simultaneously licensed under a Creative Commons Attribution License that allows others to share the work with an acknowledgement of the work's authorship and publication in this journal.
- Authors are able to enter into separate, additional contractual arrangements for the non-exclusive distribution of the journal's published version of the work (e.g., post it to an institutional repository or publish it in a book), with an acknowledgement of its publication in this journal.
- Authors are permitted and encouraged to post their work online (e.g., in institutional repositories or on their website) prior to and during the submission process, as it can lead to productive exchanges, as well as earlier and greater citation of published work (See The Effect of Open Access).
