IPF News

IPF Investigates Behavioural Influences on Property Decision-making

27 Jan 2021

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To understand how decisions can be affected by behavioural influences, and how these can be mitigated within the property investment process, the Investment Property Forum (IPF) today announces the commissioning of Intrinsic Value Real Estate Advisers (I-VREA) to provide a critical review of the topic.

Much has been written on behavioural influences, biases and heuristics, that interfere with rational decision-making. This work can be split into two strands as it relates to investment: the first deals with behavioural economics and the second looks at the decision-making process itself and how behavioural influences might be mitigated against. It is this second strand of work that the study will explore in the context of the property investment process. The aim of the research is to help provide those involved in making decisions with a framework to understand the behavioural influences that may be encountered, where they may arise and how they might be mitigated against.

The primary objective of the study will be to propose potentially mitigating behaviours that investors can adopt to lessen the potential for these behaviours to influence their decisions, with a focus on identifying actionable organisational processes.

Chris Urwin, Head of Global Research, Real Estate, at Aviva Investors and chair of the Project Steering Group (PSG) that will oversee the study, said: “Some of the greatest investors of all time were not just experts in investment markets but true students of the investment decision making process. Undoubtedly, behavioural biases exert an influence in real estate investment decisions, but this has been a largely unexplored topic to date. By identifying key biases and making practical suggestions to mitigate them, this report should provide tools for better real estate investment decisions.”

I-VREA Director, Russell Chaplin, commented: “Whilst investment decisions are being made every day, there is the potential for the decision-making process itself to lead investors towards and away from different options due to biases and short cuts which all of us can exhibit individually or as part of a group. This IPF-commissioned research should help those involved in making decisions to understand the risks inherent in their decision-making processes and how they might mitigate against those risks.”

Members of the IPF’s PSG also comprise Asli Ball (GIC), Simon Marx (LaSalle Investment Management) and Sue Forster (IPF).

The report is due for publication during the second quarter of the year.