Open AccessInternational Real Estate Review
Author(s) -
Kwabena Mintah
Publication year - 2018
Publication title -
journal of the asian real estate society
Language(s) - English
Resource type - Journals
ISSN - 1029-6131
DOI - 10.53383/100270
Subject(s) - flexibility (engineering) , real estate , thematic analysis , property management , contingency , business , viewpoints , risk analysis (engineering) , property (philosophy) , risk management , marketing , actuarial science , operations management , knowledge management , qualitative research , economics , computer science , finance , management , sociology , social science , linguistics , philosophy , epistemology , art , visual arts
Studies have demonstrated the potential of real options analysis (ROA) in property development decision-making. However, practitioners have yet to accept, adopt and integrate ROA in property development decision-making in Australia. This paper therefore investigates how Australian residential property developers manage uncertainties and risks, examines flexibility as a risk management tool, and evaluates the receptiveness and acceptance of ROA for decision making. Data are collected through face-to-face semi-structured interviews with twelve participants, and analysed by using thematic analysis. The results indicate that a discount rate is insufficient for managing uncertainties and risks; rather, contingency is used. Receptiveness and acceptance of the RO theory are mixed due to lack of unanimity among responses. Some participants are positive about flexibility, while others are dismissive. Beyond quantitative ROA models, the findings suggest that practitioners are receptive to ROA, but concerns remain over adoption. Flexibility cases executed by some participants in practice indicate that practitioners are subconsciously using ROA. Therefore, it is possible that acceptance and adoption could be achieved in the future. Evidence of the use of contingency as a risk management tool challenges the long-held notions of risk-return relationships in property development and investment. This is initial evidence of qualitative research on ROA in practice within Australian property developments.