Developers’ Preference For Location Choices In Urban Residential Land Development

Real estate developers are the developer of urban residential land and the supplier of residential housing. Their location choices will influence the formation of residential area and the operation of housing market. It can help governments to effectively guide and regulate the housing market to understand and study developers’location choices of residential land. However, the domestic study of developers started late and the range of study is limited. Moreover, most of researches on developers are based on the entirely rational hypothesis and firm homogeneity hypothesis. To fill in the gap of domestic study, this paper prepares to have a look at developers’preference for location choices in urban residential land development from the perspective of behavioral economics and firm heterogeneity.The decision of developers’ location choices actually is a tradeoff between profits and risks in different areas. It can help us better understand developers’ preference of location choices to explore the tradeoff process. In this paper, a questionnaire about developers’preference of location choices was designed based on the prospect theory and Hangzhou city is chosen as a study area. We tried to understand the tradeoff process in different locations from four aspects:developers’ judgements of profits and risks degree, developers’ utility curve, the reference point, the lowest requirement for profits and the highest risk tolerance. According to the results of the survey on developers, the relationship between developers’preference and the location factor was tested by one-way ANOVA firstly. It came out that location factor had a significant influence on developers’ preference and the the reference points’ differences among locations was the cause. Then we explore it further by adding developer’s size factor. A two-factor variance analysis was done on developers’ preference with the location factor and the developer’s size factor. The result is that the developer’s size factor has no significant influence on developers’ preference of location choices.What’ more, this paper found that developers’ risk averse, loss averse and the high risk of exurban area may hinder developers to buy land in exurban area. But when the uncertainties of exurban area decrease, developers may prefer to buy land in exurban area because of the satisfaction. Therefore, the government can attract the investment to exurban area by decreasing the uncertainties. This result has a practical sense for the development of Hangzhou real estate market.