The Relevant Factors in Creating Residential Real Estate Value

Absztrakt (kivonat)

Real Estate is often considered as the backbone of a country’s economy. In fact, the total value of all real estate in the global economy is higher than the value of stocks and bonds added up. In the case of Hungary, due to the 5% taxation rate for the sale of newly built buildings the industry has skyrocketed. the number of newly issued building permits increased 300% from 2015 to 2016. The author realized fascinating differences between the approaches of developers in terms of creating value for their customers. On the other hand, based on the principles of value creation and perception, customer value has to be captured in order to remain successful. The objective of this Thesis is therefore to identify the importance of the specified value creating factors in the residential real estate industry, both from the perspective of the developer and the customer. Within the Theoretical background, the global literature provided information regarding the general topics of market value, customer value creation and valuation methods. Studies from the field of real estate value creation and valuation have provided the basic concepts that are present on the real estate market. Based on this information, the following Research Question, and sub questions have been determined: How does the developer’s value creation and the customer’s value perception overlap on the Hungarian residential real estate market? • Is the importance of location over positioned? • Is there a difference between the value perception of customers for occupational and non-occupational purposes? In order to gather primary information, a mixed-method research was used. It consisted of a qualitative semi-structured individual interview, and a quantitative online questionnaire. The interview was conducted with Dr. Tamás Jakab, a Hungarian real estate developer. It covered various topics within the real estate market, such as the value creation approach of Hungarian developers and the value perception and needs of the customers. Furthermore, due to the extensive knowledge of the interviewee, the basic real estate development principles have also been determined. This interview was the basis of the quantitative research, by identifying and filtering out the relevant locational and non-locational factors that can influence the value perception of customers. (Geographical Location; Infrastructure; Neighborhood Attributes; Looks of the Property; Expected Improvements; Modern Technological Solutions; Green Solutions) These factors are categorized into Locational and Non-Locational categories based on the findings in the Theoretical background. Within the online questionnaire, the focus was on the above-mentioned factors, as the participants had to indicate their preferences in the form of an asymmetric 5-point (1=unimportant; 5=highly important) Likert-scale. The fillers have been categorized by the survey automatically into different categories corresponding to their type of ownership. They furthermore had the opportunity to indicate the changes in their perception compared to their first or previous purchase, and in the form of an open question, they could name factors that they consider as a reason for exclusion. The results show that the similarity between the perception of occupational and non-occupational customers is high, with minor differences that were expected. Therefore, it can be said that the differences between these two types of customers perception should be neglected. The study furthermore proved that the individual investors do not consider long-term value creation when purchasing a property, which means that they are not taking the traditional valuation methods and approaches into account. The location factor of a real estate has proven itself to be a crucial aspect within the value of a property, as both the developer and the customers attached a great importance to each of its components, geographical location, infrastructure and neighborhood attributes. The importance of location was further enhanced by participants, as many of them consider the lack of good location and its elements as a reason for exclusion. The results of the sub questions have shown that there is no significant difference between the perception of different types of customers, and that there is a general agreement regarding the importance of location in the real estate market. The results of both researches have shown that there is no need for innovative and green solutions on the market, and they are not present in the value creation approach of most large developers. Therefore, it can be determined that the value creation of the developers and the value perception of the customers overlap each other on the Hungarian real estate market.