M. Sc. Julia Süring

Analysis of buyer behaviour and value-driven parameters in real estate transactions

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Motivation

The real estate market is a heterogeneous market composed of different submarkets as well as a multitude of stakeholders from numerous disciplines. The properties, whether condominiums, one/two-family houses or terraced houses, vary in construction, equipment, quality and also in terms of their location in space. Market transparency is considered to play a significant role in this context. This can be achieved through property valuation. In order to determine the value of a property or a plot of land, the three standardised procedures of property valuation, the comparison-approach, income-approach, cost-approach, are applied. For this purpose, the description of the building must have been completed, the type of valuation object must have been finalised and the availability of object and market data must have been checked in order to be able to select the appropriate valuation procedure. Valuation procedures based on the availability of sufficient market data ensure that the value of a property is determined according to uniform criteria. Despite an objective valuation, a deviation between market values and purchase prices can be observed.

State of research 

© Süring

An extensive international literature review in the area of buyer behaviour and price-driven parameters identified two main areas of research:

• Buyer behavioural factors that influence decision-making and
• Factors influencing the price of a property.

The figure reflects terms frequently used in the context.

Issue/objectives               

Standardised valuation procedures enable a uniform framework and contribute to market transparency through the objective approach. In this context, the market value as the result of a property valuation and the purchase price as the result of an individual negotiation between buyer and seller differ from each other. An examination of the buyer's perspective is intended to provide information on which other criteria can explain this difference. Which parameters are value-determining from a buyer's perspective? Do the parameters from the buyer's perspective differ from those of the conventional approach of the valuation committees? To what extent can the parameters from the buyer's point of view gain general validity, guarantee market transparency and objectivity of the valuation?

What are the benefits of the envisaged research for the future? The added value of the research work lies in:

• an increase in market transparency and
• minimising the spread between the determined property values and the purchase prices on the residential property market.

It is hoped that the newly gained knowledge will have an influence on property valuation.

Procedure

In order to be able to approach the study of buyer behaviour and the parameters influencing value, the study area must first be defined with the selection of submarkets, target groups and sample size. Several cities classified as "B- and C-location" serve as the study area. The housing markets of these cities are considered to be tight, but do not have rapid growth tendencies like the top 7 cities in Germany. In the dissertation, only existing properties that can be classified as "old buildings" are considered. The research focuses on residential real estate, since laypersons are often active in this market. A change of perspective seems most promising here. Different research methods, such as interviews or surveys of buyers, should allow new insights into their behaviour and show which criteria influence the value of a property for them. The reflection of the insights gained in the process is carried out by means of expert interviews. The evaluation and analysis of the empirical research should provide information about the parameters influencing value and buyer behaviour in real estate transactions.