62 Motivations behind Property Developers’ Price Cut: “Profit-Sharing” vs. “Sales” Moreover, during unfavorable market conditions in which the sales rate declines, construction companies raise their discount rates to boost sales. Therefore, the discount rate is greater during a downturn in the housing market than during an upturn. The empirical analysis on the influence of product characteristics further reveals only the public facilities ratio and the main floor area (i.e., the floor area used for most properties in a construction project) significantly influence the discount rate. Conversely, the influence of the floor on which a property is located is nonsignificant. Furthermore, construction companies’ financial planning is one of the primary factors affecting the discount rate, whereas for presale or newly constructed properties, because the market evaluates the sales of these properties as a whole, the sales rate determines the success of a new project, giving more weight to financial characteristics than to product characteristics. 4. Implications As indicated by the empirical results, financial characteristics are the primary factors affecting the discount rate. Therefore, construction companies may benefit from emphasizing the financial management of their new construction projects. When the sales rate of a new construction project is stagnant during a downturn in the housing market, the company can respond by raising the discount rate thereby boosting the sales rate and reducing financial risk. Furthermore, from the perspective of transaction cost, purchasers must first consider construction companies’ financial planning when forming bargaining strategies. For instance, during a housing market downturn, construction projects often sustain the low sales rate and construction companies tend to offer larger discounts, providing purchasers with the opportunity to bargain for a better price. 5. Originality/Contribution Nondomestic studies discussing the relationship between the discount rate and housing prices have focused largely on the resale of individual properties and on the relationship between the discount rate and time on the market, which means that many studies can attest to the influence of product characteristics on the discount rate. On the other hand, research on presale properties in the domestic market has mostly focused on the price-volume relationship. Based on the general consensus that construction companies do not value the sale
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