Abstract
Entrepreneurs have always born the risk of running their business. They reap a profit in return for their risk taking and work. Housing developers are no different. In many countries, such as Australia, the United Kingdom and the United States, they interpret the tastes of the buyers and provide the dwellings they develop with basic fittings such as floor and wall coverings, bathroom fittings and kitchen cupboards. In mainland China, however, in most of the developments, units or houses are sold without floor or wall coverings, kitchen or bathroom fittings. What is the motive behind this choice? This paper analyses the factors affecting housing developers’ decisions to provide fittings based on 1701 housing developments in Hangzhou, Chongqing and Hangzhou using a Probit model. The results show that developers build a higher proportion of bare units in mainland China when: 1) there is shortage of housing; 2) land costs are high so that the comparative costs of providing fittings become relatively low.
Highlights
In many places, such as Australia, the United Kingdom and the United States, housing developers provide floor and wall coverings, window frames, cupboards, and electrical fittings as standard equipment
Of all the first hand residential units sold in Beijing districts, more than 70% were sold as bare units
This paper aims at finding out the major drivers behind these housing entrepreneurs to build bare residential units in these cities
Summary
In many places, such as Australia, the United Kingdom and the United States, housing developers provide floor and wall coverings, window frames, cupboards, and electrical fittings as standard equipment. The majority of developers in Beijing and Nanjing sell bare dwellings to home buyers. Among all the residential developments available for sale in 2004 - 2007 in Nanjing, 90% were bare units. It shows the percentage of bare flats in Beijing from 1997 2008. Of all the first hand residential units sold in Beijing districts, more than 70% were sold as bare units. This paper aims at finding out the major drivers behind these housing entrepreneurs to build bare residential units in these cities
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