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

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 của nhà đầu tư bán lẻ bất động sản)

Major: Financial Managament Code: 8340202.01QTD

SUMMARY OF THE THESIS

HANOI, 2021

FACTORS EFFECTING DECISION - MAKING BEHAVIOR

OF REAL ESTATE RETAIL INVESTORS

1 Introduction

Investors are prepared to put their money into the Real Estate market in order to profit from the trend 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 Especially through these factors, we have management strategies for the sustainable development of the Real Estate market

Research objectives:

- 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

- To indentify the factors that have a decisive impact on an individual investor's investment

in Real Estate

- To give implications for the administration goals of the study

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 - 2021

2 Theoretical basis and research model

2.1 Overview of real estate theory

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) 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)

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 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)

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)

2.2 Theory of real estate investment decisions of individual investors

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)

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

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 real estate, the author proposes factors including social factors, cultural factors, personal factors, psychological factors, and profitability factors, which are factors that affect retail investors' decision to invest in real estate, specifically such as:

Figure 1: Hypothesizes of the study

In times of global real estate market trading, 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 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 In contrast, according to this study, is the value investor 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 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 individual aspects are to be weighted so that investors can better compare different companies and sectors in the social field

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 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 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 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 “behavioral finance”

H4: Psychological factors have significant influences on real estate investment decision of retail investors

Despite all the current attractiveness of real estate investments, the key question remains - as with other capital investments - profitability The minimum level of profitability defined by the individual investor is clearly a matter of personal decision (apart from losses) Since private real estate investors, in particular, who do not want to rely solely on real estate and financial advisors, need their own options for examining an investment, this thesis offers an approach that enables a low-threshold, transparent and rapid form of the profitability analysis of real estate, taking into account property-specific data will 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

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

3 Methodology

The research process is carried out through 2 main steps: Preliminary research using

qualitative research to discover components and recalibrate the scale of the research model through group discussion techniques; Formal research uses quantitative research to measure the factors that influence real estate investment decisions based on survey data

Figure 2: Research procedure

The research is the mix between quantitative and qualitative methods The objective of qualitative research is to discover components and calibrate the scale of preliminary research components to serve quantitative research The purpose of quantitative research is

to measure the factors that influence the decision of homebuyers The sample size depends

on the analytical method, this study used exploratory factor analysis (EFA) Factor analysis requires a sample of at least 200 observations (Gorsuch, 1990); while Hatcher & O'Rourke (2013) suggests that the sample size is at least 5 times the observed variable (Hair et al., 1998) Based on the number of variables observed in this study, the required number of samples may be 200 or more

The collection of variables is indicated in the below table:

Table 1: The variables used in the model

Cultural factors CF The surrounding culture of local communities

or countries to have effects on the decision of real estate retail investors

Social factors SF Social factors including those of aspects of

society under the concept of ESG influencing over the decision of real estate investment

Personal factors PF1 Personal factors are those personalized aspects

such as knowledge, confidence, etc of each individual investor

Psychological factors PF2 Psychological factors on the stability and

psychological behaviors of investors on their decisions

Profitability factors PF3 The focusing on the measurement and returns

of investment on the decision of investors Investment decision ID Investment decision of retail investors in real

estate market

Collected data are analyzed and processed using SPSS 25.0 software The scale of components in the research model including the decision to buy a home, financial situation, characteristics of the house, living space, home location, public amenities, living environment and actual evidence is assessed

This study was carried out with about 27 variables that need a minimum of 135 (27 x 5) observations to satisfy the EFA analysis criteria Thus, the survey of 150 consumers is a sufficient number to meet the conditions for EFA analysis The scale of components in the research model, after assessing the satisfactory reliability, will be analyzed for EFA exploratory factors to measure convergence and reduce observed variables before regression analysis

4 Findings

4.1 Preliminary statistics survey variables of 6 components

The study sample has a gender difference In which, the number of male winners accounted for 53.2% compared to 46.83% of women However, this difference is not too large, in fact, the number of men participating in the real estate market much more than the women

Figure 3: Genders of participants

In this study, 150 of retail investors have participated in the real estate market, there are 68 retail investors (accounting for 45%) interested in ground land while 40% are interested in ecological land, and 23 retail investors only participated interested in project areas

(accounting for 15%)

Table 2: Interested projects

Locations No of participants Percentage

Out of 150 candidates are funded, the names of retail investors are classified as follows: The average number of people in the sample was 25 to 30 years old (accounting for 51.6%), while below 25 years old (accounting for 25.3%) and 31 to 36 years old (accounting for 20.5%), and finally over 36 years old (accounting for 2.6%)

Figure 4: Ages of participants

The statistics show that out of 150 participants, the distribution rate for the program is as

53%

47%

GENDERS OF PARTICIPANTS

Men Women

25,30%

51,60%

20,50% 2,60%

Ages of participants

Below 25 25-30 31-36 Above 36

higher education level of Ph.D or Post doc represents a small portion of the sample (11.6%), especially the post-graduate level (master) (27.4%), the high-school level accounts for 15.2% and the post-secondary level down is only a significant percentage (45.8%)

Figure 5: Education level of participants

This form can represent investors participating in the Vietnam real estate market on the Quoc Oai, Hanoi In Hanoi, the majority of retail investors are qualified people who are quite interested in the real estate market

The classification of investors based on their annual income levels among 150 private investors is as follows:

Figure 6: Income levels of participants

The survey sample statistics show that the majority of retail investors when participating in the real estate market investment in the industry There is invasion 54.7% having annual income from 1,000,000,000 – 3,000,000,000 VND The numbers of income

15,20%

45,80% 27,40%

11,60%

High school

College/University

Master

Ph.D/Post doc

Education level of participants

< 1 , 0 0 0 , 0 0 0 , 0 0 0 V N D 1 , 0 0 0 , 0 0 0 , 0 0 0 –

3 , 0 0 0 , 0 0 0 , 0 0 0 V N D

> 3 , 0 0 0 , 0 0 0 , 0 0 0 V N D

INCOME LEVEL OF PARTICIPANTS