Key factors influencing on apartment purchase decision of customers in ho chi minh city

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RESEARCH PROJECT (BMBR5103) KEY FACTORS INFLUENCING ON APARTMENT PURCHASE DECISION OF CUSTOMERS IN HO CHI MINH CITY STUDENT ‘S FULL NAME : PHAM THI NGOC VAN STUDENT ID : CGSVN00015047 INTAKE : MBAOUM0313 ADVISOR’S NAME & TITLE : A. Prof. PHAN DINH NGUYEN September 2014 1 Page ADVISOR’S ASSESSMENT ............................................................................................................................................ ............................................................................................................................................ ............................................................................................................................................ ............................................................................................................................................ ............................................................................................................................................ ............................................................................................................................................ ............................................................................................................................................ ............................................................................................................................................ ............................................................................................................................................ ............................................................................................................................................ ............................................................................................................................................ ............................................................................................................................................ ............................................................................................................................................ ............................................................................................................................................ Advisor’s signature i ACKNOWLEDGEMENTS First of all, I would like to express my sincere thanks to my thesis coach – A. Prof.. Phan Dinh Nguyen for dedicated deep guidance, precious advice and teaching me data analysis guidance in his precious time. I also would like to thank you all my colleagues and friends of HUTECH class for their valuable contributions to give comments and suggestion to revise the questionnaire survey Warmly thanks to my classmates, friends and all anonymous participants, and especially my family for their supports and inspiring me to complete the MBA course. Sep 2014 Pham Thi Ngoc Van ii ABSTRACT The speed of growing population in a recent decade together with the economic development, the demand of housing is more and more increasing while the price of ownership is big issue at Vietnam. Condominium is becoming the convenient living model for people stay in big cities such as: Ha Noi, HCM and Da Nang where the demand of living and working of immigration increasing. The beneficial view of condominium is the residents can enjoy convenient facilities from their own apartment to opening space with greenery system anywhere. The demand of condominium in big cities is certain and especially at Ho Chi Minh City where the research will pay attention real demand for middle income people. The researcher will identify factors or determinants influence on the demand of buying apartments at HCM City. The study aims to identify the key factors affecting the decision of customers to buy residential apartments in HCMC. For study purpose, a sample of 300 salaried class persons was taken by using purposive sampling technique. The sample consisted of those respondents who either bought an apartment or are planning to buy. Respondents were asked to give their opinion about listed variables on Five-point Likert Scale. By using Exploratory Factor Analysis, six factors were extracted which explained 73.916 per cent of total variance. iii Contents ADVISOR’S ASSESSMENT ...........................................................................................i ACKNOWLEDGEMENTS .............................................................................................ii ABSTRACT ................................................................................................................... iii LIST OF TABLE ...........................................................................................................vii LIST OF FIGURE ...........................................................................................................ix LIST OF ABBREVIATIONS .......................................................................................... x CHAPTER 1. INTRODUCTION ................................................................................... 1 2.1. BACKGROUND ..................................................................................................... 1 2.2. PROBLEM STATEMENT ..................................................................................... 3 2.3. RESEARCH OBJECTIVES.................................................................................... 4 2.4. RESEARCH QUESTIONS ..................................................................................... 5 2.5. SCOPE OF STUDY ................................................................................................ 6 2.6. METHODOLOGY .................................................................................................. 6 2.7. CHAPTER OVERVIEW ........................................................................................ 7 CHAPTER 2. LITERATURE REVIEW ......................................................................... 8 2.1. APARTMENT OVERVIEW .................................................................................. 8 2.2. LITERATURE REVIEW ...................................................................................... 11 2.2.1. Feature ............................................................................................................... 11 2.2.2. Finance .............................................................................................................. 12 2.2.3. Distance ............................................................................................................. 12 2.2.4. Facilities ............................................................................................................ 13 2.2.5. Environment ...................................................................................................... 13 2.2.6. Purchase decision .............................................................................................. 14 2.3. CONCEPTUAL FRAMEWORK.......................................................................... 14 iv CHAPTER 3. RESEARCH METHODOLOGY ........................................................... 16 3.1. RESEARCH PROCESS ........................................................................................ 16 3.2. SAMPLE SIZE ...................................................................................................... 19 3.3. MEASUREMENT SCALE ................................................................................... 19 3.3.1. Measurement scale ............................................................................................ 19 3.3.2. Pilot test ............................................................................................................. 19 3.4. MAIN SURVEY ................................................................................................... 22 3.5. DATA ANALYSIS METHOD ............................................................................. 23 3.5.1. Reliability measure ........................................................................................... 23 3.5.2. Validity measure by EFA (Exploratory Factor Analysis) ................................ 23 3.5.3. Multiple regression analysis ............................................................................. 24 CHAPTER 4. DATA ANALYSIS AND RESULTS..................................................... 26 4.1. PREPARATION.................................................................................................... 26 4.1.1. Editing ............................................................................................................... 26 4.1.2. Coding ............................................................................................................... 26 4.2. DESCRIPTIVE DATA ......................................................................................... 29 4.3. ASSESSMENT MEASUREMENT SCALE ........................................................ 32 4.3.1. Cronbach’s Alpha ............................................................................................. 32 4.3.2. Exploratory Factor Analysis (EFA) .................................................................. 37 4.4. HYPOTHESES TESTING BY MULTIPLE REGRESSION ............................... 42 4.4.1. Checking assumption of Multiple Regression .................................................. 42 4.4.2. Evaluating the model ........................................................................................ 43 4.4.3. Evaluating the independent of variables ........................................................... 43 4.4.4. Checking hypotheses of model ......................................................................... 44 4.4.5. Analysis effect of control variables by Multiple Regression ............................ 46 CHAPTER 5. CONCLUSIONS AND IMPLICATIONS.............................................. 47 5.1. RESEARCH OVERVIEW .................................................................................... 47 v 5.2. RESEARCH FINDINGS ...................................................................................... 47 5.3. MANAGERIAL IMPLICATION ......................................................................... 48 5.4. RESEARCH LIMITATIONS & DIRECTIONS FOR FUTURE RESEARCH HYPOTHESIS ............................................................................................................... 49 REFERENCES ............................................................................................................... 50 Appendix 1: Vietnamese questionnaire ......................................................................... 64 Appendix 1: English questionnaire ................................................................................ 69 vi LIST OF TABLE Table 3.1: Main factors affecting customers’ housing purchase decision ..................... 21 Table 4.1: Codebook of questionnaire items ................................................................. 26 Table 4.2: Characteristics of respondents ...................................................................... 29 Table 4.3: Cronbach’s Alpha test results ....................................................................... 34 Table 4.4: EFA results.................................................................................................... 39 Table 4.5: Correlations among variables ....................................................................... 41 Table 4.6: Coefficient table of MLR .............................................................................. 44 Table 4.7: Hypotheses results ........................................................................................ 45 Table 4.8: Descriptive statistics ..................................................................................... 74 Table 4.9: Cronbach’s Alpha with full items for each constructs .................................. 75 Table 4.10: KMO and Bartlett’s test .............................................................................. 76 Table 4.11: Total variance explained ............................................................................. 77 Table 4.12: Correlation among variables (Partial only) ................................................. 78 Table 4.13: Factor Matrix .............................................................................................. 79 Table 4.14: Factor Correlation Matrix ........................................................................... 80 Table 4.15: Model summary .......................................................................................... 80 Table 4.16: Anova .......................................................................................................... 80 Table 4.17: Casewise diagnostics .................................................................................. 81 Table 4.18: Residuals statistics ...................................................................................... 81 Table 4.19: Coefficients of MLR including Gender_Render ........................................ 85 Table 4.20: Coefficients of MLR including Marital_Render ........................................ 85 Table 4.21: Coefficients of MLR including Education_Render .................................... 86 vii Table 4.22: Coefficients of MLR including Age_Render.............................................. 86 Table 4.23: Coefficients of MLR including Occupation_Render .................................. 87 Table 4.24: Coefficients of MLR including Income_Render ........................................ 87 viii LIST OF FIGURE Figure 2.1 : Research Model .......................................................................................... 15 Figure 3.1: Research process.......................................................................................... 18 Figure 4.1: Scree plot ..................................................................................................... 78 Figure 4.2: Regression standardized residual ................................................................ 82 Figure 4.3: Normal P-P plot ........................................................................................... 83 Figure 4.4: Scatterplot .................................................................................................... 84 ix LIST OF ABBREVIATIONS ANOVA Analysis Of Variance CFA: Confirmatory Factor Analysis EFA: Exploratory Factor Analysis SPSS: Statistical Package for Social Scientists EFA Exploratory Factor Analysis GSO Vietnam Government Statistics Office HCMC Ho Chi Minh City Mil. Million MLR Multiple Linear Regression x CHAPTER 1. INTRODUCTION 1.1. BACKGROUND Vietnamese idiom says: “An cư lạc nghiệp” means that everybody wish to desire a stable dwelling place aimed to reside peacefully in order to be a foundation to build long term occupation. This wishing is completely satisfactory that each of us (you and me) works hard to achieve it. As universal population levels continue to rise, the housing shortage in many developing countries has reached critical levels (Morel, 2001, p. 1119). Real estate is one of the most important things to citizens, so “the house purchase decision of them can change their life” (Wells, 1993). The house purchase decisions are different from other business decisions due to “the innate, durable and long-term characteristics of real estate”. It is a highly differentiated product with “each specific site unique and fixed in location” (Kinnard, 1968). Ho Chi Minh City, the primary economic hub for Vietnam, had a population of around 7.9 million as at December 2013. Ho Chi Minh is a biggest city of Vietnam where people choose to live, work and reside. Therefore, demand of housing is increasing significant while the current price of house ownership is extremely high in spite of critical declines in real estate in recent years. And choosing apartment to reside is emerged as a practical need of people. First, thank for the economic growth and rapid urbanization and demand of housing spending has been increasingly drastic in recent years. In Vietnam, the residential market in urban areas is expanding widely. Expanding urban land supply is critical for cities in which Vietnam requires rapidly growing urban economies with supporting infrastructure and physical structure In 2013, the Vietnamese economy recorded an annual growth rate of 5.42 boasting an average annual GDP growth rate of 6.7% over the last ten years. GDP growth in 2013 was 5.4% and is expected to rise to 5.6% in 2014. Grant Thornton (2014) 1 GDP per capital of Vietnam has been growing steadily since 2000. GDP per capita has improved steadily and in line with GDP growth since 2000. The graph below shows the average national GDP; however, the actual GDP in cities such as Ho Chi Minh City and Hanoi is significantly higher. (Grant Thornton, 2014) Inflation in Vietnam averaged 7.33% from 1996 until 2013. While inflation peaked at 28.3% in August 2008, followed by inflation of 18.58% in 2011, the Vietnamese government successfully controlled the inflation at 6.6% in 2013, the lowest rate in a decade thanks to its monetary tightening policy. Grant Thornton (2014) From positive signals of economic, the real estate has been started rebounding with many projects deployed in which segment of apartment for residence is emerged sharpen while the demand of people especially are young people is increasing. This thesis examines housing preference of people live and work (especially urban residents) in Ho Chi Minh City. According to the report of “Vietnam Housing Sector Forecast to 2015” indicates the housing requirement is rising with trend of nuclear families has created immense demand expected to grow around 6% during 2012-2015. The condominiums in new urban areas are preferred by many young people because the types of condominiums offer various advantages over traditional housing types such as: lower price, good infrastructure with various facilities and services which are suitable for the needs. The demand of young people for condominiums has been increasing massively in recent few years. One of the most significant economic decisions of everybody is buying a house oneself. The need of dwelling is practical and more increasingly when the population is growing and choosing big cities for permanent residency. The real estate market in Vietnam has significantly changed during from the 1990s to now and it might be seen as three times fever and declining prices in the last 20 years. Up to the end of 2013, the large real estate outstanding loans and a big number of inventories created a serious crisis. However, according to the Deputy Minister of 2 Construction Nguyen Tran Nam, he emphasized that “people’s housing demand is very large and solvency is high, but the real estate market lacked of information”. This thesis focuses on factors which influence on people's purchase decision toward apartments / condominiums in HCM City. 1.2. PROBLEM STATEMENT The problem here is demand of choosing condominium for residence of people in HCM City has been emerged obviously and there are many projects of apartment and condominium have also been developing with multi-diversified segments by both local and international project investors, developers in a recent decade. Therefore, the Prime Minister stressed that the solution to rescue real estate market should be included in the Resolution of the Government. The main reasons of the crisis were the real estate market supply did not meet customer demands, the investors lacked of exact information of customer and real estate market conditions In fact, the demand and the supply do not meet each other due to having some undefined problems relating to buying decision of people as follow: - In Vietnam, in spite of having basic legal framework for classifying apartments of Department of Construction such as: regulatory and Decree 121/2013/CP (effective from 30 November 2013, replaced for Decree 23/2009/CP) but in practice, definition of apartments is usually stated unmethodical way by project ownership investor. These investors seem to offer many kinds of apartment with multifarious names are labeled as: middle cost apartment, high-class apartment, Penthouse apartment, … etc to launch on the market with unreasonably ridiculous prices. - There are many ambiguous concepts in definition of apartments in Vietnam and also unclearly founded criteria to classify as well as assess apartment in HCM City as particular. - The price of apartment in HCM City is still high for majority of people. And there are some roadblocks in bank loan to purchase apartment that people is facing. 3 - The quality of apartment as well as infrastructure and facilities in HCM location are big questions need to be concerned. Some matters relating to legal procedure such as: certificate of apartment ownership, term of ownership. “There are two main fields of customer research are how customers go about making decisions and how decisions should be made. In addition, “creating true value for customer and customer notion focused approach” is confirmed (Edwards & Fasolo, 2001). It is found that “customer decision making is one of the most important areas of customer behavior and it requires gathering a lot of regarding information” (Bettman et al., 1998 & Simonson et al., 2001). The real estate in Vietnam has got specific characteristics to which connected customer demands closely. In recent years, researchers, domestic and foreign companies attracted to real estate field in Vietnam with a number of research works. However, there has been not enough research into the way customers making decision to buy real estate as well as which major factors have got relationship with customer decision. In practice, beside of problems raised above, there are many limitations that the thesis would study after defining and collecting opinions and contribution through research methodology conduct. This research is supported to capture the key factors influence on demand of people in choosing apartment for dwelling in HCM City. 1.3. RESEARCH OBJECTIVES  To determine factors affect purchasing demand of residential apartment in HCMC  To study which critical factors to impact on buying decision of apartment  To suggest solutions to match demand of people and supply of residential apartments located in HCMC 4 The objective of thesis aims to conduct a survey on housing preference (condominiums /apartments) of people in Ho Chi Minh City and examine difficulties, challenges in choosing apartment for long term residence. The thesis aims to understand buying behavior of people in HCM City by studying their decision making process and type of buying behavior. This thesis will conduct studying any influence both positive and negative that may impact on purchasing decision of apartment. From investigation, survey and hypothesis to analyze each factors as well as stimulants to describe factual situation toward residential apartment. Once identifying and defining pattern of residential apartment demand corresponding to each segment, investors, planners, developers in real estate industry could use to the information to adapt in their company strategy to match with factual market needs. Understanding relationship between main factors affecting customer house purchase decision is an important role for both real estate developers and enterprises to satisfy customers’ demand and to have available strategies in the real estate field 1.4. RESEARCH QUESTIONS Consequently, in the term of real estate purchase decision of customers, the research questions of the thesis are raised as two following questions Based on this situation, I would like to point out some problems to correspond to questions stated as follow:  What are main factors influencing on apartment purchase decision of customers in HCMC. ?  How is impact of these factors on apartment purchase decision of customers evaluated in HCM context? Understanding relationship between main factors affecting customer house purchase decision is an important role for both real estate developers and enterprises to satisfy customers’ demand and to have available strategies in the real estate field. 5 1.5. SCOPE OF STUDY The study scope should be surveyed in apartment segment at HCM City where is considered a typical representative is given its population profile, excellent demographic statistical data in general The research only focuses on key factors which influence to demand of residential apartment. Target respondents for this thesis should be people who are living and working in HCMC. 1.6. METHODOLOGY The real estate is a broad topic requires further deeply research with consuming significant time and efforts. This thesis is relatively provided merely firsthand information to assess real demand and determinants impact on residential apartment buying decision. Research methodology is an important part of the whole process of research to determine how the research should be undertaken. In order to achieve the objective, both primary data and secondary data are collected to use in the thesis: The primary data is gained by distributing questionnaire on residential apartment purchasing decision to study key factors influence on. The questionnaire consists of 3 parts: socio-demographic; apartment preference pattern; apartment purchasing intention; factors influence on buying decision. The secondary data is collected from a wide variety of reliable sources including academic books, articles, newspapers, magazines, journals, publications, reports of real estate companies, official websites. Data related to apartment market in HCM City, definition and theory of apartment preference pattern; apartment purchasing intention; decision making process and previous finding will be utilized in the thesis.  By analyzing results of the primary data and compiling the secondary data  The research method refers to techniques and procedures 6  The research methodology refers to research designs and data collection via questionnaires. The inductive approach should be applied for this research to draw results from data collected and analysis and empirical observation. 1.7. CHAPTER OVERVIEW This thesis consists of chapters including: Charter 1: Introduction. This chapter is to present the general introduction of residential apartment demand and overview of Vietnamese real estate industry with apartment segment particularly. The problem statement and objectives of study are described in this chapter in details. Charter 2: Literature Review. The conceptual framework of key factors of apartment preference pattern; apartment purchasing intention, decision making process are described and the previous model/research to support for proposal hypothesis and research model for this study. Charter 3: Research Methodology. This chapter describes the research methodology and to develop the process study, measurement scale, sampling plan and the method of analysis and testing hypothesis. Charter 4: Data analysis & Results. This chapter presents the result of research such as statistical analysis and discussion. Chapter 5: Conclusions & Implications. This chapter presents the main findings and managerial implications. Besides, the limitations and further studies are also shown. 7 CHAPTER 2. LITERATURE REVIEW This chapter presents overview of previous literatures relating to apartment purchase decision making of customers. Also, a conceptual framework is built up and relative hypotheses of research are raised. 2.1. APARTMENT OVERVIEW According to David R. Henderson, the concise of encyclopedia of economic (David, 2002), the law of demand is built almost the whole edifice of economics. The law of demand states that when the price of a good rises, the amount demanded falls, and when the price falls, the amount demanded rises. However, the real estate industry does not always apply this law conclusively. The effective housing demand is the amount of housing for which the population is willing and able to pay. The effective housing demand for private housing is volatile and has been affected in the past by the market supply and market allocation mechanism. There are many factors impact on demand and decision of buyer of apartments such as: price, financing supports, household income, features of apartment, legal framework, developer, contractor, management… etc. Potential buyers have been divided into two subgroups: residents who buy and sell houses for personal use, and speculators and property developers who make money by selling and buying property (Roehner, 1999). Residents’ choice to migrate from one city to another depends on the employment, income and political and social environments. (Dieleman et al 2000) have demonstrated that population growth and employment growth seem to create differences in the rate of turnover and the differences in price levers. Many researchers claim that income is an important determinant of housing demand. There are many speculators like to get involved in buying apartments “off-the-plan” as they can see a quick profit is there to be made (Peter, 2013). These speculators like to buy off-the-plan is that they hope the property will be worth more when it is completed 8 but they seem to forget a basic economic principle; price is a function of supply and demand. In scenario of oversupply of residential apartments in HCMC and the price of an item is dependent on the demand for that item but in fact, the demand for apartment does not meet match with the supply due to price has been pushed up very high by these speculators. The population density in HCMC could be considered highest with the average density in the central at 27,000 persons per km2 when comparing with density cities in the world, namely Singapore and Hong Kong where high-rise apartment buildings are ubiquitous. The density in Hong Kong Island stands at 16,000 persons per km2 (2008) (Census & Hong Kong., 2009), and the density in Singapore is 7100 persons per km2 (2010) (Department of Statistics, 2010) (Jieming Zhu, 2011). Another factor influences on demand of buying apartment is financing support from bank and government. Credit constraints in the form of down payment requirements significantly affect housing consumption for many buyers. Bank loans are usually required by most households to finance their purchases. The credit or financial market typically cannot lend on the basis of the borrower’s expected future income prospects. Therefore, current income and current financial assets then become important indicators of a borrower’s means of repaying a loan. The availability of housing loans and government subsidies will influence consumers’ choice of whether or not to buy a home (Omar and Ruddock, 2002). The demand for housing also depends on the mortgage rates and the general level of consumer confidence (Tutor2u, 2003). The study of RNCOS (Business Consultancy Services) on Vietnam Housing Sector Forecast to 2015, one of issues relating to housing demand of Vietnamese is affordability. The report studies the affordability scenario of Vietnam and found that house price to household income ratio is much higher than the neighboring regions, creating vast gap between house price and affordability. 9
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