Factors effecting decision – making behavior of real estate retail investors = các yếu tố tác động đến hành vi ra quyết định của nhà đầu tư bán lẻ bất động sản

VIETNAM NATIONAL UNIVERSITY, HANOI VNU INTERNATIONAL SCHOOL BÙI THỊ THANH NGA FACTORS EFFECTING DECISION MAKING BEHAVIOR OF REAL ESTATE RETAIL INVESTORS (Các yếu tố tác động đến hành vi ra quyết định[.]

VIETNAM NATIONAL UNIVERSITY, HANOI

VNU INTERNATIONAL SCHOOL

BÙI THỊ THANH NGA

FACTORS EFFECTING DECISION - MAKING BEHAVIOR OF REAL ESTATE RETAIL INVESTORS

(Các yếu tố tác động đến hành vi ra quyết định của nhà đầu tư bán lẻ bất động sản)

MASTER IN FINANCIAL MANAGAMENT

HANOI, 2021

VIETNAM NATIONAL UNIVERSITY, HANOI

VNU INTERNATIONAL SCHOOL

-o0o -

BÙI THỊ THANH NGA

FACTORS EFFECTING DECISION - MAKING BEHAVIOR OF REAL ESTATE RETAIL INVESTORS

(Các yếu tố tác động đến hành vi ra quyết định của nhà đầu tư bán lẻ bất động sản)

Major: Financial Managament Code: 8340202.01QTD

MASTER IN FINANCIAL MANAGAMENT

HANOI, 2021

ABSTRACT

Vietnam real estate market has been suffering from strong uncertainties Policies, demand and investment also have been unstable and unpredictable The investors' market is still the main source of revenue for the national economy, contributing to accelerating the modernization and urbanization process, but has been operating in a mature and mature markets, with limited growth potential in the future This study aims to find out what factors retail investors influence real estate investments in to measure the degree of impact of those factors on Real Estate investment What are the factors that have a decisive impact on an individual investor's investment in Real Estate is intensively analyzed and discuss to give implications for the administration goals of the study Retail investors invest in Real Estate for the purpose of arbitrage trading The researcher intends to state clearly that retail investors and survey subjects are customers who have been buying Real Estate The difference is the purpose of buying Real Estate This section will be clarified in chapter 2 on the theoretical basis This research purposefully investigated Real Estate Market in Quoc Oai, Hanoi through an in-depth analysis from collected data from participant survey of the market from2019 - 2021

As for the methodology, the GT method was utlized to build a theoretical model by collecting, comparing, building and connecting concepts with each other, followed

by a survey quesionnaire applied on individual customers in with the minimum sample number 27 * 5 = 135 according to the data analysis method used for this study is discovery factor analysis (EFA), CFA affirmative factor analysis , factor analysis (EFE) to evaluate the impact level of each factor Using SPSS software A questionnaire survey is employed to investigate the impacts of information search

on real estate investors‘ decision-making behavior The statistical method is adopted

to analyze the quantitative data obtained from 145 investors in Quoc Oai

Research process: From practice, the author poses research problems, asks research questions, bases on behavioral finance theory and asks experts to build theoretical

models Based on theoretical model building survey questionnaires and model testing to bring out the important factors that affect the decision to invest in Real Estate at individual customers

Findings of the study show that while strategic value-added partnerships are well-established phenomenons in other industries, such as information technology, these partnerships remain scarce in real estate Unlike asset management, property management is an operational task, and, depending on the client, it is often not even considered as a management activity Therefore, property management has already been outsourced to external providers to a great extent applying the well-known criteria for "make-or-buy" decisions The decision in favor of ―buying‖ property management services therefore follows the same reasoning as for standardized commodities for which established markets exist This study demonstrated that investors (principally Vietnamese nationals) at the present time can look for real estate investment projects, where they have no special risk factors Although this market is now considered high-risk, still there are significant risks to face in this investment market, especially if you are new to the field, and take into account that the market does not want high risk at present The available system of real estate projects as such and its suitability to Vietnamese citizens in their management capability (as all other factors in evaluating a project), compared with other project types, is another important factor that would impact a participant's decisions The full and complete range of different products is offered in Hanoi real estate market and are mainly managed by local investors and companies

ACKNOWLEDGEMENT

I would like to thank the Board of Directors, the training department of the International Faculty, Hanoi National University for creating all conditions for me

in the process of studying and completing this thesis

I would like to express my gratitude to the teachers and ladies who have dedicatedly taught MFM2 master class

I would like to express my deep gratitude to my teacher, Dr Nguyen Thi Kim Oanh who wholeheartedly helped and guided me during the process of writing this thesis

I would like to thank all my friends, colleagues and family who have always supported, encouraged and created the best conditions for me to complete this thesis

Thank you!

Author

TABLE OF CONTENTS

ABSTRACT i

ACKNOWLEDGEMENT iii

LIST OF TABLES vi

LIST OF FIGURES vii

CHAPTER 1: OVERVIEW OF THE RESEARCH THESIS 1

1.1 Reasons for choosing topics 1

1.2 Research objectives 1

1.3 Research subject and scope 2

1.4 Thesis Layout 2

CHAPTER 2: THEORETICAL BASIS AND RESEARCH MODEL 4

2.1 Overview of real estate market 4

2.1.1.Real Estate Concept 4

2.1.2.Basic Features of Real Estate 4

2.1.3.Real estate goods 5

2.1.4.Real estate classification 6

2.1.5.Real estate market concept 7

2.1.6.Real estate market characteristics 7

2.1.7.The role of the real estate market 8

2.1.8.Real estate market in recent years 8

2.2 Theory of real estate retail investors 9

2.2.1.Investment decision concept 9

2.2.2.Retail investors concept 10

2.2.3.Factors effecting decision – making behavior of real estate retail investors 12

2.2.4 Stages of the process through the retail investor‘s decision to invest in real estate 19

2.2.5 Some domestic and foreign studies related to the topic 20

2.2.6 Research model and hypotheses 22

CHAPTER 3: RESEARCH METHODS 28

3.1 Introduction 28

3.2 Research design 28

3.2.1Research Methodology 29

3.2.2Survey process and preliminary statistics 30

3.3 Data analysis 33

CHAPTER 4: RESEARCH RESULTS 35

4.1 Preliminary statistics survey variables of 6 components 35

4.2 Cronbach Alpha analysis 39

4.3 Factor analysis 41

4.4 Test research models and hypotheses 46

CHAPTER 5: CONCLUSION AND LIMTATION 50

5.1 Conclusion 50

5.2 Limitations 52

REFERENCES 54 APPENDIX I

LIST OF TABLES

Table 1: The variables used in the model 33

Table 2: Interested projects 36

Table 3: Cronbach Alpha analysis 40

Table 4: Exploratory factor analysis 43

Table 5: Correlations between dependent and independent variables 45

Table 6: Model Summary 46

Table 7: ANOVA 46

Table 8: Coefficients table 47

LIST OF FIGURES

Figure 1: Hypothesizes of the study 22

Figure 2: Research procedure 29

Figure 3: Genders of participants 35

Figure 4: Ages of participants 36

Figure 5: Education level of participants 37

Figure 6: Income levels of participants 38

Figure 7: Number of years for participants being active in real estate market 39

CHAPTER 1: OVERVIEW OF THE RESEARCH THESIS

1.1 Reasons for choosing topics

The Real Estate market has an increasingly important position in the national economy, contributing to accelerating the modernization and urbanization process, bringing many housing solutions to many classes of people, attracting strong attention strong investment capital sources, bringing a great source of revenue for the State Budget However, in recent years, a series of important events such as Vietnam's accession to the WTO, the global financial crisis in 2008, along with continuous economic and political changes have created many changes for Real Estate market Investors are wondering where to put their money when the stock market has been operating in moderation for many years, the real estate market has not shown signs of recovery, the gold bullion market has now been restricted by the state inflation and gasoline are soaring, the currency is devalued… Not only that, but the trend of investment in herds, according to the crowd is becoming more and more popular Many investors ignore the analysis of investment assets and only care about the immediate trend of the market

Facing the impacts of the Covid-19 pandemic on the economy and real estate market, the Government has come up with appropriate solutions to support the real estate market to recover quickly As a result, the housing sector and the country's real estate market in general still have positive changes, creating a growth engine for the real estate market in the coming time Recently, the Government has policies to revive the Real Estate market through stimulus packages, but this is not enough, we need to study the factors that determine the investment of investors individuals to contribute to the recovery of this market Especially through these factors, we have management strategies for the sustainable development of the Real Estate market

1.2 Research objectives

Find out what factors retail investors influence real estate investments in The degree of impact of those factors on Real Estate investment What are the

factors that have a decisive impact on retail investor's investment in Real Estate Give implications for the administration goals of the study

1.3 Research subject and scope

Research subjects: Retail investors invest in Real Estate for the purpose of

arbitrage trading Here the author would like to state clearly that retail investors is a group of investors working together

Research scope: Real Estate Market in Quoc Oai, Hanoi

Scope of study time: In-depth analysis from collected data from participant

survey of the market from 2019 to 2021

Research method and process

Research Methods: First, the author uses the GT method to build a

theoretical model by collecting, comparing, building and connecting concepts with each other

The author then surveyed retail investors in with the minimum sample number 27 * 5 = 135 according to the data analysis method used for this study is discovery factor analysis (EFA), CFA affirmative factor analysis, factor analysis (EFE) to evaluate the impact level of each factor Using SPSS software

A questionnaire survey is employed to investigate the impacts of information search on real estate investors‘ decision-making behavior The statistical method is adopted to analyze the quantitative data obtained from

150 retail investors in Quoc Oai, HaNoi

Research process: From practice, the author poses research problems, asks

research questions, bases on behavioral finance theory and asks experts to build theoretical models Based on theoretical model building survey questionnaires and model testing to bring out the important factors that affect the decision to invest in Real Estate at retail investors

1.4 Thesis Layout

Chapter 1 Overview of research topics

- Overview of the main contents of the thesis and research issues: Reasons for choosing topics, objectives, meanings, research methods and new points of the topic

Chapter 2 Theoretical basis and research model

- Presenting the concept and basic understanding about Real Estate market

Behavioral Finance theory Presentation of benefits and risks when investing in real

estate The impact of real estate on the economy

Chapter 3 Research method

- Presentation of research methods used to evaluate the scale of research concepts, theoretical models and preliminary statistics of survey variables

Chapter 4 Research results

- Discuss research results, give and evaluate the impact of factors affecting investment decisions in Real Estate

Chapter 5 Conclusion and limitation

- Propose management solutions to improve investment decisions and develop the Real Estate market more sustainably

CHAPTER 2: THEORETICAL BASIS AND RESEARCH MODEL

2.1 Overview of real estate

2.1.1 Real Estate Concept

Real estate is an immovable material asset and the name for a piece of land

or a structure (building, house, apartment, etc.) Colloquially, the term real estate is usually only used in the context of built-up land, although undeveloped land can also be referred to as real estate (Voskresenskaya, 2017)

The term real estate has no meaning from a legal point of view In legal texts, real estate is mentioned in the context of land It defines the term property as a spatially delimited part of the earth's surface that is entered in the land register This also includes all buildings on it or all objects that are firmly attached to the ground (UNECE, 2020) The motivation to buy a property also plays a role Then it's about investment properties or investment properties Existing properties are referred to

as existing properties If the property is newly built, it is a new building Properties are either lived in or rented out themselves Older properties worth preserving are often under monument protection and may only be renovated and changed in accordance with monument protection guidelines

2.1.2 Basic Features of Real Estate

At the center of the real estate industry is real estate, the subject of this research discipline However, the term ―property‖ is not defined uniformly - neither

in common parlance nor in the various economic disciplines that deal directly or indirectly with property It is true that ―real estate - space and money over time" in the sense of an economic consideration of the property, but this reduction of the property to a "cash flow machine" hardly does justice to the participating sciences (Phyrr, et al 1989) Therefore, in the context of an interdisciplinary understanding

of real estate economics, the term "real estate" should be understood as follows: Real estate is an asset that consists of built-up properties with associated buildings and outdoor facilities They are used by people within the framework of physical-

technical, legal, economic and time limits for production, trade, service and consumption purposes (Bone-Winkel, 2019)

Real estate-related issues have seen a huge surge in attention since the early 1990s The fundamental economic importance of the sector n "around the real estate" leads rightly to questions about the state of the scientific occupation with the special features of a teaching and research area, which deals with the problems of the real estate industry and related sectors From an epistemological perspective, an area of reality such as dealing with real estate becomes a science if it is possible to delimit it and systematically organize it with the help of definitions and terms, in order to then investigate it according to plan using scientific methods (Hennings, 2000)

Two basic approaches have emerged in American research: the

―Multidisciplinary Approach‖ represented by Graaskamp and the ―Financial Management Approach‖ developed by Diaz (1993) In Graaskamp's understanding, real estate is man-made artifacts that are embedded in a psychological, social and political context (Weiss, 2000) In contrast, the Diaz (1993)‘s approach is characterized by the effort to achieve a clear distinction from other scientific disciplines by restricting them to financial, primarily quantitative aspects

Up until the beginning of the 1990s, only building and housing economics in Vietnam dealt with property-related topics However, these contributions mainly deal with the function- or institution-specific individual questions and problems and usually lack an overarching frame of reference for the integration of scientific efforts (Schäfers, 1997) Reasons for the scientific neglect of the real estate industry are, in addition to the characteristics of the real estate and the real estate market, a lack of willingness to differentiate in the economics Nevertheless, a relevant scientific discipline must not stick to traditional ways of thinking, but must build on

an innovative, and holistic perspective

2.1.3 Real estate goods

Real estate is a fixed and immovable commodity, and at the same time, is influenced by factors of customs, habits and regional characteristics Therefore, real

estate transactions are deeply regional On the other hand, because each region has a different economic development, the development of the real estate market is also distinguished (Ruf, 2011)

The real estate market is formed from a series of small local markets with different sizes, levels and transaction dynamics

2.1.4 Real estate classification

The actors are divided into roles, industries and organizations Since the real estate industry is a very heterogeneous branch of the economy, many actors not only belong to one process, but also take on tasks throughout the life cycle of the property The study accordingly defines different roles, such as property managers, building contractors, facility managers, owners, project developers, insurers, etc (Kummerow, 2005)

The sectors are subdivided according to the classification of economic sectors A distinction is made between sectors with real estate as a core business and sectors with real estate as a resource In the sectors with real estate as their core business, those sectors are included that have a high priority in the life cycle of real estate (Wu Y H., 2020) A distinction is made into three groups with a total of seven areas, which can also encompass several economic sectors:

estate and housing, private households as owners of real estate, as well as building maintenance and security (Credit Suisse, 2021)

and engineering offices, building construction-related construction industry, areas

of finance as a capital provider or financial intermediary or the public sector as a sovereign institution in the planning and approval process (Credit Suisse, 2021)

sectors that manufacture building materials and building technology products and are more or less directly involved in the construction of buildings This also includes disposal, transport, trade and legal advice services (Credit Suisse, 2021)

All branches of the economy included in the study - with the exception of real estate and housing - are also involved in activities that do not belong to the real estate industry In addition, the study only takes into account the performance of the domestic economy and estimates the tax effect triggered by the real estate industry

2.1.5 Real estate market concept

The real estate market is the process of real estate transactions between related parties It is the "place" where activities of buying, selling, transferring, leasing, mortgage and related services such as: intermediaries, brokerage, consulting, etc The role of State management has a decisive impact on promoting development or inhibiting business activities in the real estate market

2.1.6 Real estate market characteristics

The preceding definition of terms shows that real estate differs significantly from other economic goods (Bone-Winkel, 2019) The main characteristics of real estate as an asset are immobility, heterogeneity, the duration of the development process, the size of the investment volume and transaction costs, the length of the life cycle and limited substitutability (Lucius, 2001)

The special properties of real estate as an asset lead to specific characteristics of the real estate market - or rather, the markets for real estate, which differ in terms of subject matter and location However, some common features can be identified for all sub-markets: low market transparency, dependence on economic developments, low elasticity to adapt to market changes and cyclicality (Coiacetto, 2006)

The State is one of the forces involved in the operation of the real estate market The State's participation is mainly in the role of unified manager of the activities of this market In order for the real estate market to operate effectively, the State needs to ensure the legality of real estate transactions and control transactions

in the real estate market (Roulac, 1996)

The influence of the State is one of the factors that create the imperfection of the real estate market Any State has intervention in the real estate market at

different levels, in which mainly land is used to achieve common development goals Real estate is different, market information is limited, while land in the primary market depends on the decision of the State Therefore, the real estate market is an incompletely competitive market (Kaklauskas, 2011)

2.1.7 The role of the real estate market

In order to determine the economic importance of the real estate industry, it makes sense to follow the investment theoretical understanding of the economic real estate term, in which the value of a property is measured by the price at which the market rewards the benefits it creates (Schulte, 2005) However, a clear determination

of the importance is often difficult due to the complexity of the real estate industry and the interdependence with other sectors The use of space and its market rewards as a basis for definition also leave special questions open (Clayton, 2003)

In a broad definition, the real estate industry includes not only real estate stocks but also the construction industry, including planning services, as well as land management and financing institutions The real estate industry not only includes buildings or structures, i.e residential buildings, private and state non-residential buildings and civil engineering works, but also the land on which they are built and building land (Ifo, 2005)

2.1.8 Real estate market in recent years

Over the years, the real estate industry has made significant contributions to the economy However, from 2020, the challenges posed by the Covid-19 pandemic

as well as economic slowdown have caused impacts on the general market situation, creating bottlenecks in the real estate market, specifically as effect from foreign investment capital flow or Investment capital flows of domestic and foreign enterprises

Investment capital flows of domestic and foreign enterprises have not been active, making the real estate market less exciting than in previous years

Effect from foreign investment capital flow: According to data from the Foreign Investment Department (Ministry of Planning and Investment), as of March

20, 2021, the total newly registered foreign investment capital, adjusted adjustment and capital contribution and share purchase from foreign investors reached 10.13 billion USD, up 18.5% over the same period in 2020 This is a fairly strong increase, after the first two months of consecutive decline Of these, newly registered capital reached 7.2 billion USD, up 30.6% over the same period; adjusted capital reached 2.1 billion USD, up 97.4% over the same period (Phan, 2021)

2.2 Theory of real estate retail investors

2.2.1 Investment decision concept

The fundamental expectations that an investor has of an investment are of decisive importance There are various objective standards and criteria for assessing the various types of investment However, it is always the investor's personal ideas and goals that determine their weighting, advantages and benefits Wealth can only

be built up with the right strategy (Fietta, 2006) Therefore, every investment decision should be carefully considered At the beginning of every wealth planning there is the creation of an investor profile, i.e a precise overview of the financial situation and the question of personal investment goals, the investment period and the willingness to take risks

On the one hand, there is a tension between investment and return, because

in order to achieve the highest possible security, a low return must be accepted Conversely, above-average returns are always associated with increased risks In short, the higher the return, the higher the risk There is no such thing as a high return with a low risk that is above the market average An investor who is willing

to take a high risk wants this willingness to take risks with a high return (Ambler, 2020) On the other hand, there can be a conflict between liquidity and return, as more liquid investments are often associated with disadvantageous returns An investor who owns a liquid investment has the security of being able to turn it into money at any time and will therefore accept a lower return The higher the liquidity, the lower the return (Vincent, 1999)

According to Mangram (2013), the American economist Harry Markowitz created a theory (for which he received the Nobel Prize) about the positive effect of diversification on the risk of the investment and the subsequent return on the portfolio With this mean variance model, a lot of historical data (performance, and fluctuation range) is initially required For each option, all variances and co-variances must be estimated There is now broad consensus in the literature that these many necessary estimates are problematic For a period of at least ten years, it was checked which method would have delivered better results in retrospect: That

of Markowitz, or a simple rule in the form that calculates 1 / n (i.e., the money to be invested equally on all available systems divides)

Unfortunately, it is also not possible to use some kind of algorithm to derive

a rigid, mathematical trading rule from the best available patterns (evaluation and sentiment data) Due to the many variable environmental factors, this would be far too simple Rather, investment decisions require the experience of well-trained specialists who, among other things, can refer to very good performance data - over long periods of time from the past This is the only professional way to approach such a complex event as the real estate markets

2.2.2 Retail investors concept

It looks completely different with complex questions When it comes to these questions, less is more In the meantime, many research results indicate that one's own intuition is still the most important decision-making factor (Dane, 2007) A survey of economists has shown that, even among these experts who are trimmed to maximize utility, almost no one uses economic decision-making tools for elementary decisions, but relies on their own intuition This also applies to most areas of the real estate markets and also to the interpersonal area (Samuelson, 2021)

One of the most successful lawyers in US history, Gerry Spence, who has not lost a single criminal case in thirty years, points out in his book "Argue and Win" that no seminars should be attended that teach how "artificial" methods can be used

to convince other people Rather, the truth should always be kept and it should be

represented as it is believed to be right From his point of view, any other rhetoric is very counterproductive According to him, humans have an intuition that enables them to instinctively find out whether someone is telling the truth Someone who no longer communicates authentically can easily be misinterpreted (Spence, 2003) Interpersonal communication is therefore counted among the areas in which one should proceed intuitively Rather, the truth should always be kept and it should be represented as it is believed to be right From this point of view, any other rhetoric

is very counterproductive (Griffin, 1999) According to him, humans have an intuition that enables them to instinctively find out whether someone is telling the truth Someone who no longer communicates authentically can easily be misinterpreted Interpersonal communication is therefore counted among the areas

in which one should proceed intuitively Rather, the truth should always be kept and

it should be represented as it is believed to be right From this point of view, any other rhetoric is very counterproductive

Given the tuition of one in the context of investment, the balanced mix is the be-all and end-all of any capital investment - based on the personal circumstances and needs The right spread is always the prerequisite for success Because if the capital is diversified, the risk of a loss of wealth is reduced (Wu, 2020) An English proverb says ―Never put all eggs in one basket!‖ Distribute retail investments over various components, such as cash, bonds, stocks and funds Reduce the risk of a single investment A mix of different types of investment, in several countries, sectors or currencies, ensures that retail‘s assets are not exposed to excessive setbacks Disproportionate losses in one area can be absorbed by other investments (Baranova, 2017)

This second dimension of intuition about success includes everything that is necessary for retail investors help them meet their long-term financial goals This largely coincides with the conclusion of our past research activities: The value proposition of the industry must evolve towards success is defined as something personal that is exclusively related to the goals of the investors can be seen Success

also includes important things, but gladly neglected areas such as effective communication with customers or their appropriate introduction to the subject of financial investments (Huang, 2015) Institutional and retail investors need quite a lot from their investment managers urgently more than just asset allocation and real estate selection Retail investors need help with the development of a meaningful and targeted investment strategy, and they need some help to understand what success looks like in achieving this strategy And perhaps the most important point: retail investors often need guidance when it comes to stick to this strategy for a longer period of time (Thorpe, 2020)

2.2.3 Factors effecting decision – making behavior of real estate retail investors

According to Philip Kotler, consumer behavior is influenced by four main factors: cultural, social, personal and psychological All of these factors give us the basis to know how to reach and serve buyers more effectively (Kotler, 1998) Especially, in the area of real estate, we also consider the profitability factors

2.2.3.1 Cultural factors

Dealing with the topic of ―behavioral finance‖ is also motivated by the consideration that, unlike the natural sciences such as physics, it is a scientific discipline in which the human aspect plays an important role (Tomer, 2007) Accordingly, to Olsen (2010), this aspect should also be taken into account

in the theoretical considerations However, the dominance of the postulate of the rational homo economicus has meant that this important aspect is not sufficiently taken into account in the theory The consideration and recognition of irrational behavioral components in human beings is not a matter of course in human science,

if one looks back to the past and the early days of the Renaissance or psychoanalysis are recalled

According to Hens et al (2017), a variety of academic studies show that the value strategy consistently delivers higher, long-term returns - but it is by no means

a convenient strategy Because while the value strategist focuses on retail investors,

these are not immune to general market movements In general, it has been shown that value real estate, on the one hand, offer excess returns in rising markets On the other hand, however, they are often punished relatively severely in the event of market downturns To be a successful value investor, you need two things: patience and a high tolerance level for losses

Various academic studies show that value investing consistently generates higher returns over the long term than the comparable market, comments Hens on the results of the study However, not every investor is equipped with the right temperament for this investment strategy The two most important qualities a value investor should have are patience and tolerance for loss (Wang, 2017) The INTRA study shows us that the Nordic and Western cultures in terms of Patience is best equipped for the value strategy Anglo-Saxon cultures, on the other hand, are best able to cope with losses Investors from African and Eastern European cultures do not have these skills and are therefore likely to be less successful value investors After these cultural differences have been identified, it is interesting to examine the Nash equilibrium known from game theory: If fewer investors try to track down value real estate in the emerging markets, there will have to be correspondingly higher value premiums for patient and loss-tolerant investors of other nations to be available A value fund that invests in the emerging markets would therefore be an ideal product for Scandinavians, Germans and Anglo-Saxons (Wang, 2016)

2.2.3.2 Social factors

ESG stands for Environment, Social, Governance and describes all factors related to environmental protection, social responsibility and responsible corporate management These rather ―soft‖, non-financial factors point to the extremely real economic risks that can arise for a company through ecological, social or entrepreneurial misconduct However, they are not only central for assessing investor own investment risk, but also for anticipating regulatory provisions that can

be expected in the near future In addition, the principles of sustainable development are increasingly being integrated into the traditional due diligence of fiduciary institutions (Gillan, 2021)

ESG combines the parameters Environment - Social (working conditions, health system, safety) - Governance (good corporate governance) When real estate companies document their examination of these criteria, they give investors the opportunity to make sustainability-conscious decisions and invest (Camilleri, 2020) More than 80 percent of the more than 100 market players in the real estate industry surveyed by EY Real Estate for the current ESG snapshot expect high investor demand for sustainable products in the future Three quarters of the market players also stated that, in their opinion, predominantly sustainable products will come onto the market in the future (Halkos, 2020) The consideration of ESG factors in the investment process should not only be understood as a reaction to moral or regulatory pressure from outside Rather, it is, and above all, a question of reason For example, climate change poses a serious and highly tangible risk for more and more companies, and it is not without reason that the social aspects of economic activity are increasingly weighted Understanding how such factors relate

to the investment decisions can provide a much better understanding of how they will affect the long-term return potential of the portfolio (Camilleri, 2020)

Basically in real estate industry, it can be stated that the added value of ESG

or sustainability criteria can be reflected in two dimensions On the one hand, in the property quality itself – the material used, the location, the design, resilience and flexibility This can translate into good usability, low operating costs and a long remaining useful life, thus increasing the value of the property, regardless of a rating or certification On the other hand, the transparency that a certificate or rating provides to market participants also influences market value (Kempeneer, 2020) Due to the current low supply, the influence of sustainability may initially result in a high price premium, which could decrease as soon as the number of demonstrably sustainable properties on the market increases, and ultimately turn into a value discount for non-sustainable properties A good ESG rating in combination with recognized proof would have become the standard at this point (Feng, 2021)

2.2.3.3 Personal factors

Those who earn money also have to pay taxes There is nothing wrong in itself when everyone participates in ensuring that the community is not lacking for anything People with low incomes are taxed lower than those with high or very high incomes In this way the tax system tries to achieve some form of social justice But as many taxpayers as there are, there are as many opinions as possible

on the subject of tax justice (Oishi, 2018)

Since the state favors companies, it makes sense to officially become an entrepreneur A real estate investor can therefore find a real estate investor This is a corporation Since this company is the owner of the acquired real estate, the company is also entitled to the sales proceeds If profits are made, it is society's profits The real estate investor himself usually only acts as a managing director He pays a managing director's salary, which is paid by the corporation It is perfectly legal to form a company for doing business The advantage of a real estate company

is taxation (Osennyaya, 2019) A society does not pay income tax like a retail This

is where corporate income tax becomes in the amount of certain percentage, according to the effective tax law for real estate trading In most cases, this is cheaper than the income tax that would have been paid, if this route is of interest to you, we not only provide you with experts for your advice, but we accompany your company from day one with our start-up route Here we relieve them of everything that has to be done in terms of formalities before they can lead the company into the activity This saves you valuable time and energy that you can put into your actual project, the real estate business (Forsyuk, 2019)

described (Shah, 2018) Although investors are more aware of these limitations today, their emotionality and cognitive abilities keep playing tricks on them Such decisions, along with the portfolio structure, the choice of investment strategy and the fees, are among the most observed challenges when investing This can end up being expensive on the real estate market We have put together the six most common sources of error

Richard Thaler was awarded the Nobel Prize in Economics Thaler is a pioneer of ―behavioral economics‖, a theory that has decisively influenced our thinking in relation to the economy and the financial markets He recognized that psychological factors play a key role in our financial decisions (Appelbaum, 2017) This paved the way for new economic theories and enabled other scientists such as Daniel Kahneman and Andrew Lo to better explain the influence of non-rational quantities on the development of our economic system Standard economic theories reduce all members of society to completely rational, and calculating economic subjects (Lin, 2017)

Thaler and his colleagues, on the other hand, have shown that our human way of thinking and feeling not only influences our professional career, our decision about where we live and our choice of partner, but also our decisions as to whether and how we spend the fruits of our labor or save And also - and this is the most important point for investors - how we make decisions about the future when we are faced with uncertainty (Keeney, 2021) In the following explanations, the essential components of the relatively young branch of capital market research, behavioral finance, are considered from the author's point of view Selected phenomena of behavioral finance that affect retail investors and their possible application in investment advice are presented While traditional finance is based on the utter rationality of decision-makers, behavioral finance emphasizes the psychology and irrationality of investors This makes it possible to clear up some contradictions in traditional finance The new view of the financial markets also results in a wide range of possible applications that can be implemented in portfolio management (Costa, 2017)

2.2.3.5 Profitability factors

Those who take important basic rules to heart, calculate correctly and use optimization potential will be successful Investing in quality properties with solid tenants is an important prerequisite Furthermore, it should be noted that interest payments for properties used by third parties can be claimed for tax purposes, provided that there is a permanent intention to earn income The structure of the loan and loan terms also influence the return For example, the return on equity can

be improved under certain conditions if more debt capital is used in investments instead of equity capital (leverage effect) A practical example shows how a detailed return calculation can be carried out and what optimization potential this reveals:

An investor owns a rented condominium that is expected to generate a three percent return annually When calculating the return, the property was once financed entirely from own funds; in the second calculation, this was done with the inclusion

of real estate investments The long-term development of a property can hardly be predicted because many factors influence it over the years The current return on a property, on the other hand, can be precisely determined with a detailed analysis The return on property must always be assessed based on the type of property: residential properties have a stable profile due to constant demand Commercial and especially special properties such as hotels, on the other hand, follow the economic trend more strongly In addition, risk factors such as the term of rental contracts, potential for subsequent use or the technical useful life are also important here

In order to be able to assess the success of an investment, there are return ratios with different meaningfulness The most common are gross yield or gross initial yield, net yield, return on equity and return on distribution Real estate is one

of the most expensive objects that most people will ever purchase in their lives But

if people do not move in yourself, but buy the property as an investment, you often overlook the financial dimension of the investment This is due to the current financing model, according to which investors only use the necessary equity for the purchase and the ancillary costs For the larger part of the investment, however,

they take out a building loan from a bank or building society Then a few tens of millions of VND in savings are enough to finance a property as an investment Most people can still remember long phases in the past decades when the demand for real estate was rather moderate and the supply was sufficient or even high In such a phase, the selling price for a 15-year-old property is likely to be below the purchase price The pessimistic scenario shows: the return falls significantly with a less optimistic calculation If the costs increase and the selling price drops even further, there is not much left of the promised return

Any investment or investment decision of real estate is particularly risky, as

it is based on uncertain future cash flows and cannot be corrected at a later point in time, or only with losses (Giglio, 2021) The variables income (return), liquidity and security (risk) are interdependent and sometimes compete with one another

Return

Return is understood to mean economic performance It is opposed to the effort The actual interest rate is understood as the ratio between the return and the capital employed or the market value of the property and corresponds to the return

on the property The rate of return is one of the most important metrics when it comes to real estate investments The associated income and expenses are required

as a basis for calculating the relevant returns In principle, these are determined using the property income statement

Liquidity

The liquidity in this context stands for the tradability of the possibility of buying and selling an asset If a purchase / sale is possible at any time and in the required volume at market prices, one can speak of a liquid investment Otherwise, one speaks of an illiquid investment

Direct real estate investments usually involve large lots and high transaction costs The high acquisition and transaction costs mean that direct real estate investments are made over the long term A discount or a surcharge usually has to

be paid if transactions of directly held properties are processed in a short period of

time That is why direct real estate investments are referred to as illiquid investments

Risk

The peculiarities, especially the heterogeneity in the real estate market, make

it difficult to quantify the risk of an investment in a key figure In general, real estate risks can be categorized according to Wellner into external risks on the one hand and internal risks on the other Environmental risks, economic risks, industry-specific risks and location-specific risks are external risks that affect the property from the outside Property risks can be understood as internal risks (Wellner, 2011)

2.2.4 Stages of the process through the retail investor’s decision to invest in real estate

Investment planning

An investment opportunity or need for investment is recognized during the suggestion phase For example, bottlenecks can occur, technical systems have reached the end of their planned useful life or new legal requirements apply

A basic distinction is to be made

replaced by a new one;

more economically usable ones;

expanded

Furthermore, it must be determined according to which criteria the investment decision is to be made These can be qualitative, strategic, technical, legal, social and temporal aspects, but also monetary evaluation criteria such as cost, profit, profitability and payback period The controller has to ensure an objective selection and - if there are several evaluation criteria to be used - an appropriate weighting

Limiting factors reduce the number of alternatives

Limiting factors can be set to reduce the number of investment alternatives to

be considered, but also to meet any minimum requirements These include, for example, technical performance features

In the 2nd phase of the investment decision-making process, the search phase, possible investment alternatives must be identified and their framework conditions, e.g., to determine investment amount, follow-up costs, technology The alternatives can be preselected on the basis of any limiting factors that may have to

be taken into account

Decision on the best alternative

The investment planning process is completed by the decision phase Now the remaining alternatives have to be analyzed and evaluated in more detail The aim is to determine a suitable investment decision

During the entire process of investment planning, investment controlling has to provide appropriate control information in the event of recognizable changes and, if necessary, necessary adjustments, so that the best possible decision can finally be made

Early controls make it easier to achieve the goals

In the subsequent implementation phase, the prerequisites for the implementation of the decision must be created For example, the necessary permits must be obtained and the funds required to realize the investment must be made available The investment decision and its basic variables, e.g., critically review of utilization, sales, costs and payments These controls, along with the analysis of deviations from the investment planning, provide valuable experience that can be used to improve the planning of subsequent investment projects

2.2.5 Some domestic and foreign studies related to the topic

In the expected utility theory, which goes back to von Neumann and Morgenstern (1944), there is no distorted risk perception This theory is considered

a fundamental economic model in normative decision theory for measuring risk

aversion The risk appetite is taken into account, but subjective perceptual effects and context-dependent factors are not included in the risk behavior This contrasts with the prospect theory (prospect theory) of Kahneman and Tversky (1979) as still the most discussed psychological decision theory It is a descriptive theory that can

be used to describe some phenomena that cannot be explained with traditional finance theory The prospectus theory takes into account that people can act unreasonably and uneconomically She relativizes the model of the always rationally acting "Homo Oeconomicus" and instead assumes distortions of perception when making decisions The prospectus theory has played a decisive role

in shaping behavioral finance as a relatively new field of research This examines the behavior of investors in the financial markets, using theories and methods from psychology, sociology and traditional economics

From a behavioral point of view, the concept of an objectively determinable risk is rejected Psychologists assume that risk is a construct that does not exist independently of an assessor Slovic and Weber (2002) describe risk as "something inherently subjective" and their opinion on risk: "It does not exist 'out there', independent of our minds and cultures, waiting to be measured." From a psychological point of view, it is not the objective risk and return measures that are decisive for the investment decision, but the subjective perception of risk, the personal risk appetite and the retail assessment of future returns In the investment context, subjective risk perception is understood to mean how investors subjectively assess the objective, measurable risk of an investment In this thesis, the terms risk assessment and risk assessment are used synonymously for the term risk perception Probably the best-known model for measuring risk perception is the psychometric model that was developed by Slovic, Fischhoff and Lichtenstein (1980) based on studies of the perception of safety and health risks In this approach, the attempt is made to query the risk values subjectively perceived by the retail directly by means

of a questionnaire using rating scales It has been proven that different risky objects

or situations can be described by a number of qualitative risk aspects, which

determine the risk perception It was possible to reduce these risk aspects to two central risk dimensions by means of factor analysis, which are referred to as "dread risk" and "unknown risk" The two factors can be concretized in the investment context as "perceived risk of loss" (dread risk) and as "perceived uncertainty" (unknown risk)

2.2.6 Research model and hypotheses

Based on the theory of consumer behavior of Philip Kotler and combined with the combined results from previous studies on factors affecting the decision to invest in

factors, personal factors, psychological factors, and profitability factors, which are factors that affect retail investors' decision to invest in real estate, specifically such as:

after:

Figure 1: Hypothesizes of the study

Rieger, Wang, & Hens, (2015), the leading scientists in the field of behavioral finance, presented findings from a current, worldwide study "Risk preferences around the world" in Luxembourg The aim of the study is to find out whether individual investment decisions and returns on stock markets have a cultural dimension Hens carried out the study together with leading financial

scientists worldwide, in which 45 nations have participated to date The study comes to the conclusion that despite the increasing interconnectedness of global markets, cultural differences continue to influence investment behavior Investors of certain nationalities are therefore more likely to invest successfully than others because they have the two most important virtues: Patience and a high tolerance for loss The Scandinavian and German-speaking cultural regions are the most patient while the Anglo-Saxons have the highest tolerance for loss

In times of real estate market, when any investor can invest in any market, the prevailing thesis of traditional finance theory is that culture has no influence on investment decisions and market returns Hens et al (2017), on the other hand, gives two reasons why this view should be challenged First of all, they refer to the home bias that can be observed in practice - i.e., the tendency of investors to invest in securities from their home country or region (Wang, The impact of culture on loss aversion, 2017)

These cultural differences are therefore examined in the INTRA study Hens

et al (2016) compares the reactions of investors to market fluctuations The result shows that emotional investors tend to buy when prices are high and sell when prices are low There are three reasons for this: firstly, investors lack a strategy, secondly, they let themselves be carried away by short-term events, and thirdly, they cannot bear to lose money In contrast, according to this study, is the value investor They buy - in relation to the true value of the company - heavily undervalued real estate This enables them to approach the ideal case: Buy at low prices and sell at high prices (Wang, 2016)

H1: Cultural factors have significant influences on real estate investment decision of retail investors

The fact that investors have so far not paid so much attention to social standards at companies can be seen, for example, from the fact that companies have not yet adopted standardized reporting for social aspects Few companies have a reporting system to present data on social issues to investors In comparison, the

strong focus on environmental factors has led security issuers to develop systems and reporting concepts on issues such as carbon emissions, fossil fuel reserves and the use of clean energy

Linked to this is the difficulty of defining social key figures at all Social affairs encompass a great many different topics: from consumer protection to product safety, labor law and occupational safety, diversity, the fight against corruption and compliance with human rights throughout the supply chain To make matters worse, the factors are weighted differently in individual countries On average, people place greater emphasis on compliance with human rights and the avoidance of child labor For instance, in England, on the other hand, the issue of workforce diversity has grown in importance in recent years In order to make progress here, it is important to clearly define and measure what primarily defines a social enterprise The next step is to decide how the retail aspects are to be weighted

so that investors can better compare different companies and sectors in the social fied

Despite the challenge of addressing social factors, practice shows that companies that pay poorly for their employees, for example, have to reckon with considerable difficulties For example, a passenger transport service initially lost its license in London due to poor working conditions And one airline posted declining passenger numbers after it became known that it pays its pilots a comparatively low wage Another example is the outcry that went through the media after the collapsed sewing factories in Bangladesh and put the fashion industry under pressure

H2: Social factors have significant influences on real estate investment decision of retail investors

A real estate investor is a classic entrepreneur He or she has all the skills that are needed to successfully use economic relationships and developments to his advantage Often times are real estate investors started as a career change from other industries They often start with the purchase of a small residential unit (e.g., condominium) The sale or rental of this unit usually generates profits These, in turn, are invested in further property This creates a process that ensures ever greater

sales and profits In just a few years, a real estate investor can build up considerable wealth through wise action and skillful investments The entrepreneur concerned decides for himself how intensively he wants to conduct his business As a private real estate investor, some are satisfied with just a few units, others prefer steady growth Not every real estate investor acts full-time The real estate investor can also work part-time for the pleasure of this type of activity Here one speaks of private real estate investor

One of the most important tasks of the real estate investor is to track down lucrative land, apartments and buildings For this, the real estate investor has to know the market very well Your own region is particularly suitable for the first steps towards becoming a private real estate investor Only later, when the first positive experiences have been made, can the activities also take place supra-regionally Another job of the real estate investor is to track down bargains The successful real estate investor therefore either has sufficient specialist knowledge to assess real estate or has a network of experts The better the specialist knowledge, the less risk the entrepreneur bears A real estate investor does not fall in love with the property, but with the expected profit that arises from renting and selling That

is why favorable opportunities, distress sales and foreclosures are his daily bread This is why the personal factors of skills and knowledge in the context of real estate are critical to retail investors A real estate investor should also have good contacts with the financial world

H3: Personal factors have significant influences on real estate investment decision of retail investors

Analyzes or even empirical studies with regard to psychological factors influencing the behavior of investors are, however, only inadequate, although psychology undoubtedly exerts a great influence on what happens in the securities markets In particular, the motives and expectations of investors have so far been little used as an object of research In October 2002, together with Kahnemann and Smith, psychologists were awarded the Nobel Prize for Economics for the first time

Currently, especially in science, there is a growing number of voices that increasingly regard the models that have dominated for decades as unsatisfactory due to their inadequate explanatory and prognostic content New research approaches are therefore emerging, within which not only the further development

of the prevailing models is in the foreground, but a paradigm shift is also called for more and more frequently One of these relatively new research directions, which does not replace the prevailing models but aims to develop them further, and whose roots can be found in behavioral research, has established itself under the term

of the real estate location and the fundamentals of investment management The result is answers to the question of how much a real estate investment may ultimately cost

The calculation of returns in the real estate sector is one of the aspects that must be taken into account when buying a property, especially if it is an investment property In the case of own use, the affordability calculation is used, which the banks also use to talk about a mortgage Nowadays, buying a house is more advantageous than renting because of the low interest rates However, necessary

considerations must be made before taking this step The return on real estate is an important factor, and there are calculation bases to arrive at an estimate The advantages of real estate capital investments are numerous and so the concrete gold

is not only considered to be low risk, but over the years you also benefit from an increase in value But, as always, if you want to invest, you have to carefully weigh the opportunities and risks

H5: Profitability factors have significant influences on real estate investment decision of retail investors