Abstract:
It is widely acknowledged that property investors operate in environments characterized by a series of market disruptions that could significantly impact their investment decisions. These disruptions could emerge from sudden or gradual changes to the market’s regulatory, social, economic, technological or environmental conditions. Being a fraught phenomenon, the reality of property market disruptions necessitates the need for investors to adapt to the changing environment as they make investment decisions in order to remain competitive and profitable. Whereas several conceptual models have been proposed to explain property investment decision-making, little is known about how property investors make investment decisions amidst property market disruptions. By exploring evidence from the emerging field of behavioural finance, this research investigates the disruption-driven investment decision-making strategies of Listed Property Trusts (LPTs) in New Zealand.
Following the tenets of relativist philosophy and qualitative research methodology, this study adopts a phenomenological approach within case studies of LPTs in New Zealand and was investigated in two stages. The first stage of the research involved an extensive documentary analysis of LPTs’ annual reports for contents that describe how they have responded to disruptive events in the property markets over an extended period (from 2009 to 2019). The outcome of the documentary analysis provided the basis for in-depth semi-structured interviews with LPTs’ experienced, senior-level decision-makers to shed light on the decision-making strategies through which disruptive events were adapted to in their LPTs.
Also, the study utilises the concept of institutionalism to theoretically frame the empirical analysis of LPTs’ responses to property market disruptions. This facilitates the identification of both the formal rules that guide the conduct of LPTs amidst market disruptions and the informal interactions that exist amongst various organisations and players in the market, which often lead to new behavioural norms and more practical approaches to market adaptation. The research outcome reveals that the adaptive responses (i.e., investment flexibility, effective communication, proactiveness, innovation and divestment) of LPTs to property market disruptions involve a combination of rational and intuitive components, with the decision-makers switching between rational and intuitive reasoning. Drawing on the overall analysis, the study proposes a framework that describes the adaptive response of LPTs to property market disruptions. Specifically, the framework highlights the stages that LPTs’ decision-makers follow as they seek to adapt to property market disruptions. The study also identifies relevant factors characterising the adaptive decision-making of LPTs. The study findings suggest that, in addition to the common behavioural factors documented in property investment literature, LPTs’ adaptive decision-making may also be influenced by the personality of the decision-maker. Thus, this study makes original empirical contributions to property investment literature by not only providing insights that can enable and empower property investors to optimise their decision-making amidst disruption but by also raising psychological issues that may occur in the process. Further, the study outcome offers novel insights on the use of phenomenology within case studies as a robust methodological approach for understanding the unique perspectives of investors based on their lived experiences.