Decision Making On Housing Products Development Based On Clients' Willingness-to-pay

Chinese real estate business runs into hot water after 20 years of booming. As a result, the housing market now is in buyers'hand. Real-estate businesses are facing challenges and competitions they never seen before. In order to maintain positive cash flow and survive, business has to carefully manage risk in the decision making process and pay extra attention to the product line.However, current domestic real-estate business operations and product line selection has substantial room for improvement. For example, the process is limited to preliminary market analysis, and is not complete or accurate enough to support decision making. Also, the currently widely used product line selection is oriented to developer and based on their cost strategy rather than consumers'preference, or"willingness-to-pay of clients". As a result, housing supplies that based on insufficient market analyses fail to respond to clients'needs in time. Equilibrium of supply and demand in the housing market could not be reached.Hereby, I would argue product line selection is a systematic process with several steps. They are: build decision making team, design the decision making process, use"willingness-to-pay of clients"method, prepare supporting document, and goal setting. The key is the"willingness-to-pay of clients"method, which will be the focus of this paper.This method first use data collected in client survey or data accumulated over years of business practice reflecting client's preference. Secondly, client's preference is ranked with priority and is weighed against the cost. Then, the data will be processed using appropriate formula, and an appropriate combination of products in a development is reached. This combination could possibly address the clients'need and stay in budget in the same time. Therefore, an operable real-estate strategy and sound business decision making process is realized.A case study -"East Bank neighborhood development"is used in this research. In this case, product line decision makers coordinate sales, design and cost management departments. First,"optional cost"is taken from total development cost, then optional cost is further breakdown into categories. After that, a survey is put together with these categories to address the"willingness-to-pay of clients". This survey will be conducted among home owners of East Bank Neighborhood development"(Phase I). The survey data will be processed using statistics, computation, analysis and evaluation. The outcome of the process will be an optimized resource allocation strategy, which will be applied in Phase II development of the same project as a market-tested standard.Decision making based on"willingness-to-pay of clients"method will bring the developers'operation to a whole new level with more accuracy, feasibility, and accountability. It is client and market oriented, and will empower the Chinese real estate business with concrete foundation in order to win in the fierce competition.