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Asymmetric Information and Residential Entrepreneurs’ Choice on Provision of House Fittings

In: Law, Economics and Finance of the Real Estate Market

Author

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  • Rita Yi Man Li

    (Hong Kong Shue Yan University)

Abstract

Running a real estate business is risky; it requires heavy capital investment in land, professional training and recruitment. Nevertheless, this huge expenditure does not guarantee a great return, and it is possible to suffer a substantial loss if the entrepreneur makes a wrong decision. Provision of home fittings is one of the risks that the housing entrepreneur faces. Some buyers dislike the fittings and thus decide not to purchase the home. In Hong Kong, land supply is scarce, but demand is huge (7 million people live in a small city with a hilly landscape). Land price occupies a relatively large proportion of the costs in dwelling production. Provision of a towel ring, washing basin, water closet, and other fittings only uses a small proportion of the total costs of construction. Besides, many developers have run their business for years and accumulated sufficient knowledge on buyers’ taste. Nevertheless, in mainland China, especially in areas of low land costs, costs of fittings have become relatively high. The risk of supplying fittings that prospective owners dislike is higher. Many entrepreneurs do not wish to take the risk. This chapter aims at reviewing the asymmetric information and risks that housing entrepreneurs face in mainland China and analysing entrepreneurs’ decision in response to this risk.

Suggested Citation

  • Rita Yi Man Li, 2014. "Asymmetric Information and Residential Entrepreneurs’ Choice on Provision of House Fittings," SpringerBriefs in Economics, in: Law, Economics and Finance of the Real Estate Market, edition 127, chapter 0, pages 63-70, Springer.
    • Handle: RePEc:spr:spbchp:978-3-642-54245-9_4
    DOI: 10.1007/978-3-642-54245-9_4
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