Gut feeling or reason--How do property developers decide? An international research project on rational and intuitive behaviour in the field of property development

Abstract

Human decisions are context-dependent, for instance influenced by the availability of infor-mation. But they also depend on the character traits of the decision-maker, for instance the tendency to decide intuitively (based on emotions and affection) or deliberately (based on reasoning). Perhaps real estate development is a field, which is prone to intuitive behaviour because of the specific characteristics of this activity, which include lengthy time horizons, and the lack of information that often accompanies the development process. Surveys among developers have confirmed this, showing that intuition, creativity, instinct, and similar behavioural attributes are regarded as critical success factors in this sector of the market. However, that does not render market analysis, investment calculation and other rational fac-tors useless. The issue that this paper deals with is that decision theory has not yet discovered and, hence, does not assist in deciding in which situation a particular type of decision-making is most advantageous. Our research sheds light on how developers in various cultures and market contexts make decisions. This work should contribute in improving the decision-making quality in the development sector. The paper has two main parts. The first part is a literature review, which combines the find-ings on the role of intuition from the managerial decision theory and the psychological deci-sion theory. The second part introduces our research methodology and deals with a series of experiments, undertaken in South Africa and in Germany. These test the personal prefer-ences of the interviewees and then present them with a case study requiring a choice to be made between two alternative development options. The experiments will be undertaken with experienced property development practitioners and property management students. With the help of statistical analyses we intend to show the influence of personal preferences regarding intuition and deliberation on the decision behaviour in the sphere of property development.