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FUNDAMENTAL ASPECTS OF MARKET RESEARCH

FUNDAMENTAL ASPECTS OF MARKET RESEARCH. Main objectives of chapter: * To discuss types and levels of market research. * To discuss the issues and scope of market research. * To discuss research consulting in general. * To discuss the research process.

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FUNDAMENTAL ASPECTS OF MARKET RESEARCH

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  1. FUNDAMENTAL ASPECTS OF MARKET RESEARCH • Main objectives of chapter: * To discuss types and levels of market research. * To discuss the issues and scope of market research. * To discuss research consulting in general. * To discuss the research process. • Expected learning results: * know the types and levels of market research; * can identify issues and scope of market research; * understand property market research consulting; * understand and apply the scientific method in a market research.

  2. Types of research

  3. Level of research

  4. Level of research – Inferential analysis • Sometimes called trend analysis. • Uses secondary time series data and emphasises on the estimates of future changes in values by investigating past market trends. • Identifies trends and patterns and infers expected market behaviour. • Real estate analysts use statistics two draw inferences about a general class of phenomena, studying recent data to predict future events. • Attempts a projection of historical trends focussing on macro data.

  5. Take-home exercise • Study the rental trend of properties in your state since 1990. Use any forecasting methods to estimate the likely rental level in 2004. • Apply your finding above to office in your locality. Comment on your findings. Submission: next lecture

  6. Level of research – Fundamental analysis • Goes beyond trend analysis. • Forecasting based on segmentation of broad demographic and economic data to reflect the subject’s specific market. • Principle: real estate value is tied to the services the real estate provides. • Uses micro data for a specific parcel of land and sub market • Oriented toward future developments. • E.g. to estimate the future capture rate of retail property: * identify the market/area of competition * identify competing properties * compare subject with competing properties * estimate capture rate of competing properties * estimate capture rate of subject property.

  7. Issues and scope of market research

  8. Direct Factors S = f(expectation of demand; planned supply; competitive environment, and; availability and cost of land, labour and capital) D = f(population; income; employment; relative prices; taxes; interest rate; down payment requirements; and future expectations)

  9. Indirect Factors • STEP factors: * Topography and soil conditions, * engineering, * production process, * zoning, utilities, * transportation linkages, * environmental impact, * public facilities & amenities, * consumer behaviour, * economic conditions, * and government law and regulations.

  10. Scope of market research

  11. Data Synthesis and Recommendations

  12. Research Consulting Process • Instructions to carry out a specific study • Consulting proposal • Contract signing • Systematic procedure for study • Communication and co-ordination of work • Four stages of research consulting: * Developer’s goal and objectives; * Analysis of the general market conditions; * Market and/or feasibility study; * Project decision. • Example

  13. Steps in Research

  14. STEPS IN THE SCIENTIFIC METHOD Three basic steps in property market research:  Ascertaining market conditions:  * Information: SS & DD, prices and rentals, sales & and leasing transactions, investment, competition, product innovation) * Analyze markets and produce forecasts  Converting ‘gut feelings’ into ‘intelligent information’ through a scientific approach • Drawing conclusions & communicating the results

  15. Defining the research problem and objectives • A problem/decision needs information. • Must know how to obtain the information. • Avoid wrong information, incorrect interpretations, or information that costs too much. • Advise how to define the problem and suggest ways to make better decisions. • Identify the necessity of research (See Figure 2.4).

  16. Defining Research Problem and Objectives (contd.) • Do not too vague or too broad. E.g. “Gather the data on the residential market",  hundreds of things can be researched! What is specific decision facing the company? Best site for residential or commercial? How much demand from each alternative use? Should price be the sole factor? If not, what are other factors? • From the problem comes objectives. • Govern the entire research process. • Can be exploratory, descriptive, and causal. • Put in writing to be certain about purpose and expected results.

  17. Deciding on Research Approach • Primary versus secondary research • Primary and secondary (already discussed). • Primary: original research, carried out for a new and specific purpose. • Secondary: existing research, useful to those who buy or read the published reports. • Ad hoc versus continuous research • Ad hoc: once-only basis and is complete in itself. E.g. To evaluate the management quality of a shopping complex to find out what the tenants and shoppers say about facilities, security, rental level, business profitability, management-tenant relationship, etc.

  18. Deciding on research approach (contd.) • Continuous: conducted regularly, each succeeding report shows the movement of trends over time, about a particular variable. E.g. surveys on rental level, selling price, cost of material, sales turnover, and competitors' strategies can be conducted from time to time. • Quantitative versus qualitative Quantitative: total, percentage, mean, std. deviation, etc. Qualitative: seeks information on reasons, perceived images or motives rather than numerical measurement of variables.

  19. Deciding on the Types of Research • Some of types of market research: A. Desk research B. Field research C. Observational research D. Survey research

  20. Developing a Research Plan A. Determining specific information • Decided based on research objectives. • E.g. to investigate how the prospective buyers will react to a new housing product at a reduced price: • The demographic, economic, and lifestyle characteristics of current owners of similar housing products. • The benchmark information of overpriced housing products. • Affordability profile as reflected by the affordable average propensity to spend and the required average propensity to spend. • The price bands and how they affect consumers' purchase decisions. • Forecasts of sales of the product under study with the reduction in price.

  21. Developing a Research Plan (contd.) B. Survey of information • Secondary or primary. • Starts by gathering secondary data, internally or externally. • Help define the problem and research objectives. • Cheaper and quicker. • Problems: unavailability, irrelevance, inaccuracy, non-currency, partiality of data. • Thus, go for primary data!

  22. Developing a Research Plan (contd.)

  23. Developing a Research Plan (contd.) 2. Research instruments Questionnaire. • Questionnaire is difficult to design. • Elicit relevant information to answer research questions. • Needs to be developed, tested, and debugged for actual survey. • A good research comes from a good questionnaire design. • Needs proper sampling techniques. Checklist. • Contains elements/items of interest for which the subject perceives, pays attention or acts upon. • Popular in observational research. E.g. visitors inspecting a model house: What a visitor inspects? Why? How he/she evaluates things? What he/she finally does?

  24. Developing a Research Plan (contd.) • Implementing data collection • Most expensive and subject to error. • Should monitor the fieldwork closely to: * make sure that plan is correctly implemented. * guard against various survey problems (contacting respondents, respondent’s non cooperation, biased or dishonest answers, interviewer’s mistakes, etc.). • Data must be processed and analysed. * checked for accuracy and completeness. * coded for computer analysis. * apply computer programs to prepare statistics and advanced statistical and decision analyses.

  25. Developing a Research Plan (contd.) D. Presentation of results • Interpret the findings • Draw conclusions about the implications • Report them to management • Useful tips: • Do not overwhelm managers with numbers and fancy statistical techniques • Present major findings that are relevant to the major decisions research problem • Interpretation should relate to problem situation • Avoid bias • Check whether: the research project was properly carried out, all the necessary analyses were done, there area additional questions that could be answered using the data collected. • Put up recommendations objectively.

  26. SUMMARY OF THE CHAPTER ▪ Real estate market research: a systematic design, collection, analysis, and reporting of data and findings relevant to a specific market situation facing a real estate company. ▪ Market research can be specific or general. ▪ Two levels of market analysis: inferential (trends and future forecasts) and fundamental (specific site analysis). ▪ Research consulting process: developer’s goal and objectives; analysis of the general market conditions; market and feasibility study; and project decision.

  27. SUMMARY OF THE CHAPTER (contd.) • Seven general steps in conducting any research: defining the research problem and objectives; deciding on research approach; deciding on the types of research; developing research plan; implementing research plan; presentation of results; and disseminating information. • Research results must be presented to company’s management and results be interpreted correctly. • Findings may be distributed internally for company use or published for wider access.

  28. REFERENCES • Abdul Hamid bin Hj. Mar Iman (2002). An Introduction to Property Marketing, Skudai: Academic Publication Unit; • Barett, G.V. and Blair, J.P. (1982). How to Conduct and Analyse Real Estate Market and Feasibility Studies. Van Nostrand Reinhold Company. • Fanning, S.F., Grissom, T.V., and Pearson, T.D. (1994). Market Analysis for Valuation Appraisals. Chicago, Illinois: Appraisal Institute. • Greer, G.E. and Farell, M.D. (1988). Investment Analysis for Real Estate Decisions, 2nd. ed.

  29. Thank you!

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