Integrating rational and irrational factors towards explicating investment satisfaction and reinvestment intentions: a study in the context of direct residential real estate

Purpose The purpose of this study is to understand the investment decision-making of real estate investors in housing, highlighting the interplay between rational and irrational factors. In this study, investment satisfaction was a mediator, while reinvestment intention was the dependent variable. Design/methodology/approach A quantitative, cross-sectional and descriptive research design was used, gathering data from a sample of 550 residential real estate investors using a multi-stage stratified sampling technique. The partial least squares structural equation modelling disjoint two-stage approach was used for data analysis. This methodological approach allowed for an in-depth examination of the relationship between rational factors such as location, profitability, financial viability, environmental considerations and legal aspects alongside irrational factors including various biases like overconfidence, availability, anchoring, representative and information cascade. Findings This study strongly supports the adaptive market hypothesis, showing that residential real estate investor behaviour is dynamic, combining rational and irrational elements influenced by evolutionary psychology. This challenges traditional views of investment decision-making. It also establishes that behavioural biases, key to adapting to market changes, are crucial in shaping residential property market efficiency. Essentially, the study uncovers an evolving real estate investment landscape driven by evolutionary behavioural patterns. Research limitations/implications This research redefines rationality in behavioural finance by illustrating psychological biases as adaptive tools within the residential property market, urging a holistic integration of these insights into real estate investment theories. Practical implications The study reshapes property valuation models by blending economic and psychological perspectives, enhancing investor understanding and market efficiency. These interdisciplinary insights offer a blueprint for improved regulatory policies, investor education and targeted real estate marketing, fundamentally transforming the sector’s dynamics. Originality/value Unlike previous studies, the research uniquely integrates human cognitive behaviour theories from psychology and business studies, specifically in the context of residential property investment. This interdisciplinary approach offers a more nuanced understanding of investor behaviour.