A MCDM-Porfolio Optimization Approach to Property Investment: Application to Asian Real Estate Market

Bai Bingqing

Abstract

This project focuses on a MCDM approach to property investment with application to five Asian locations, namely Singapore, Beijing, Kuala Lumpur, Hong Kong and Bangkok. After thoroughly studied through literature review, five criteria are identified for property investment asset allocation when constructing Analytical Hierarchy Process (AHP). In order to address the uncertainty and credibility of sources used for pairwise comparison matrix in the modeling, Fuzzy-AHP with various degree of fuzziness is introduced to mitigate uncertainty presented in the pairwise comparison scoring. This report further extends to propose a portfolio management with the use of Fuzzy AHP results to give a comprehensive property investment suggestion applicable to Asian market to real estate investors. The paper covers literature study on AHP and Fuzzy-AHP model construction, pairwise comparison matrix scoring and sensitivity analysis, portfolio management and result analysis and evaluation as well as conclusions. The main purpose of this report is to present a comprehensive study on the steps to follow in property investment decision analysis. It starts with base model decision analysis with use of AHP model and crisp value pairwise comparison scoring. Then through identifying the issue of AHP model’s inability to address the information inadequacy, Fuzzy AHP model is introduced to enhance the decision analysis. Result from Fuzzy AHP model will then be used for property investment portfolio management to minimize risk while maintaining a certain level of return. The relative information is referenced from various journals and studies. During the analysis process, some assumptions have been made based on current real estate investment situation due to information unavailability. Furthermore, this decision analysis model analyzed with YAAHP software and Excel which eventually provide reasonable recommendations and conclusions with evidence.