The role of bidding in determining price and time on the market for residential property

• Main Author: Brown, Louise
• Published: University of Ulster 2012
• Subjects: 333.338
• Online Access: http://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.558814

Housing market dynamics and in particular the recent decline in house price trends are issues that have drawn international attention due to widespread ramifications for the economy through lending practices, exposure to risk and the associated impact on manufacturing and service industries. This has lead economists to consider the level of influence that collective behaviour of homeowners decision making can have on demand for property and residential property prices. This presents a challenge to existing econometric models that are built on fundamental economic factors influencing prices as the dynamics of behaviour are not explicitly considered. Northern Ireland experienced unprecedented rapid price growth (2005-2007) followed by a period of sharp decline (2008-2009). The housing market is almost exclusively traded through a process of negotiated sale in the open market which provides a case study for vendor and buyer interactions. The dataset for this research contains 3124 detailed transaction histories for properties sold in the Belfast Metropolitan Area, the largest residential market in Northern Ireland, between January 2002 and December 2009 facilitating investigation of housing market dynamics through analyzing trends of actual bidding histories. The effects of vendor and bidder behaviour in a rising and a falling market on time on the market and sales price relative to list price are analysed. Time to first bid is advocated as an alternative measure to time on the market. The research analyses the fundamental differences between single bidder and multiple bidder sales in terms of price discovery and risk and the effects of the number of bidders on time on the market and price. Evidence for different list price strategies and bidding strategies in rising market and falling markets is presented with concentrations of extreme bidding behaviour and loss aversion.